-«**- 


DEBA  TERS'  HANDBOOK  SERIES 


MUNICIPAL  OWNERSHIP 


DEBATERS^ 
HANDBOOK  SERIES 


Enlargement  of  the   United  States  Navy 
(3d  ed.  rev.  and  enl.) 

Direct  Primaries     (3d  ed.  rev.  and  enl.) 
Capital  Punishment     (2d  ed.  rev.) 
Commission    Plan    of   Municipal    Govern- 
ment    (3d  ed.  rev.  and  enl.) 

Election  of  United  States  Senators   (2d  ed. 

rev.) 
Income  Tax     (2d  ed.  rev.  and  enl. ) 

Initiative  and  Referendum     (2d    ed.  rev. 

and  enl.) 
Central  Bank  of  the  United  States 
Woman  Suffrage     (2d  ed.  rev.) 
Municipal   Ownership     (2d    ed.    rev.  and 

enl.) 

Child  Labor 

Open  versus  Closed  Shop     (2d  ed.) 

Employment  of  Women 

Federal  Control  of  Interstate  Corporations 

Parcels  Post     (2d  ed.  rev.  and  enl.) 

Government  Ownership  of  Railroads 

Compulsory  Arbitration  of    Industrial  Dis- 
putes 

Compulsory  Insurance 

Conservation  of  Natural  Resources 

Free  Trade  vs.  Protection 

Reciprocity 

Trade  Unions 

Recall 

Other  titles  in  preparation 

Each  volume,  one  dollar  net 


Debaters^    Handbook   Series 


SELECTED  ARTICLES 


ON 


MUNICIPAL  OWNERSHIP 


COMPILED  BY 

JOY  E.   MORGAN 

AND 
EDNA   D.   BULLOCK 


Second  and  Enlarged  Edition 


»  J  9    t 


J        »  » 

9     O  J    »    ' 


•  *  .       * 


THE   H.   W.   WILSON   COMPANY 
WHITE  PLAINS.  N.  Y.  and    NEW  YORK  CITY 

1914 


% 


Published  1911 
Second    Edition    January,    1914 


EXPLANATORY  NOTE 


The  vast  quantity  of  literature  concerning  municipal  owner- 
ship, much  of  which  has  been  produced  within  the  last  few  years, 
is  in  itself  complete  evidence  of  the  rapidly  widening  interest  in 
our  public  municipal  utilities.  The  material  here  collected  has 
been  gathered  and  arranged  for  (i)  debaters,  (2)  students  of 
municipal  problems,  and  (3)  others  desiring  compact  informa- 
tion   on   municipal    ownership. 

The  arrangement  is  natural  and  logical.  First  occurs  the 
brief  to  acquaint  the  student  with  the  scope  and  general  analysis 
of  the  question  and  the  arguments  pro  and  con  in  outline  form. 
The  table  of  contents  precedes  the  brief.  The  reprints  are  ar- 
ranged in  the  order  of  the  brief  as  far  as  practicable.  The 
bibliography  is  sufficiently  complete  to  include  all  important  ma- 
terial, yet  not  so  inclusive  as  to  be  bewildering  to  the  inexperi- 
enced investigator.  Annotations  have  been  added  where  they 
would  be  of  real  value  to  the  student. 

In  view  of  the  vast  amount  of  material  on  this  subject, 
prejudiced,  popular,  and  scientific,  it  is  believed  that  this  book 
will  furnish,  not  only  an  inexpensive  practical  method  of  supply- 
ing material  on  municipal  ownership,  but  will  be  a  guide  as  well 
to  the  novice  and  the  veteran  student. 

EXPLANATORY  NOTE  TO  SECOND  EDITION 

In  this  revised  edition  the  additional  reprints  are  found 
in  the  concluding  pages.  They  consist  chiefly  of  material  on 
municipal  transportation,  a  subject  upon  which  there  is 
little  available   literature   relating  to   American   conditions. 

December,  1913. 


280186 


i 


CONTENTS 

Brief xi 

Bibliography 

General  References   xv 

Affirmative    References     xx 

Negative    References    xxiv 


Introduction 


General  Discussion 

United  States.     Industrial  Commission.     Report 3 

Doherty,  Henry  L.    What  the  Public  Does  Not  See 

Des  Moines  Register  and  Leader        9 

Public  Service  Enterprises Springfield  Republican        9 

National  Civic  Federation.     Report  on  Municipal  and  Pri- 
vate Operation  of  Public  Utilities 10 

Rowe,  Leo  S.  Municipal  Ownership  and  Operation 

American  Journal  of  Sociology      11 

Burdett,  Everett  W.     Municipal  Ownership  of  Engineering 
Utilities Engineering    Magazine      13 

Municipal    Ownership Outlook      18 

Municipal    Ownership    Investigators Nation      22 

Johnson,  Edmond  R.     Public  Regulation  of  Street  Railway 

Transportation Annals  of  the  American  Academy  24 

Problems    of    Municipal    Ownership Outlook  29 

Donald,   Robert.     Principles  of  Municipal   Ownership 

Outlook  30 

Affirmative  Discussion  / 

Parsons,  Frank.    Fifteen  Reasons  Why  the  People  Should 
Own  Their  Own  Public  Utilities Arena      39 

Selleck,  W.  A.     Municipal  Ownership 

Nebraska   State   Journal      40 


Vlll 


CONTENTS 


Municipal    Ownership Outlook      43 

Dunne,  Edward  F.    Municipal  Ownership— What  It  Means. 
Reader      46 

Adams,  Henry  C.    Municipal  Ownership  and  Corrupt  Poli- 
tics      Outlook      48 

Burns,   John.     ^Municipal    Ownership   a   Blessing 

'. Independent       51 

Dunne,  Edward  F.     Our  Fight   for  Municipal  Ownership. 

Independent      55 

Ely,  Richard  T.    Advantages  of  Public  Ownership  and  Man- 
agement of  Natural  Monopolies    CosmopoHtan      61 

Brown,  George   Stewart.     Municipal   Ownership   of   Public 

Utilities North    American    Review      67 

Rowe,  Leo  S.    Municipal  Ownership  and  Operation  of  Street 

Railways  in  Germany.  .Annals  of  the  American  Academy      75 
Donald,  Robert.     Municipal  Ownership  of  Street  Railways 

in   Glasgow Outlook      80 

Argument  for  the  Municipal  Ownership  of  a  Street  Rail- 
way Company City  Hall      88 

Ely,  Richard  T.     Municipal  Ownership  of  Natural  Monop- 
olies   North   American   Review      94 

Negative  Discussion 

Municipal  Socialism Quarterly  Review     106 

Cravath,  James  R.     Municipal  Ownership  of  Electric  Light 

Plants World  To-Day    114 

Darwin,  Leonard.     Municipal  Trade Quarterly  Review     123 

Hill,   John   W.     Municipal   Ownership   of    Public   Utilities. 

World  To-Day    125 

Thurber,  F.  B.     Arguments  against  Municipal  Ownership. 

North   American   Review     133 

Hill,  John  W.    Comparison  of  the  Cost  of  Steam  Power  in 

Municipal    and    Privately-Operated    Plants 

Engineering  Magazine     141 


CONTENTS  ix 

Jones,  Chester  Lloyd.     American  Municipal  Services  from 

the   Standpoint   of   the   Entrepreneur 

Annals  of  the  American  Academy    143 

Main    Question    in    Municipal    Ownership 

Journal  of   Commerce    158 

Brandeis,  Louis  D.    How  Boston  Solved  the  Gas  Problem. 

Review   of   Reviews     159 

Burdett,  Everett  W.    Municipal  Ownership  in  Great  Britain. 

Journal  of  Political  Economy     164 

Brown,  William   Horace.     Public   Ownership   and   Popular 

Government American  Journal  of   Sociology    180 

Robbins,  Hayes.     Public  Ownership  versus  Public  Control. 

American  Journal  of  Sociology    193 

Additional  Reprints 

Calgary,    Alberta.    City    Clerk.    Municipally    Owned    In- 
dustrial Sites   221 

Municipal  Asphalt  Paving  Plant 223 

Calgary  Municipal  Street  Railway   223 

Regina,    Saskatchewan.    City   Clerk.    Electric    Light   and 

Power  Plant 231 

Street  Railway  and  Spur  Track  System   232 

Winnipeg,  Manitoba.  City  Clerk.  Municipal  Ownership . .     234 

Sheehan,  C.  M.  and  Firmin,  Albert.  Municipal  Lighting. 

Twentieth  Century  Magazine.     236 

Lloyd,  Henry  Demarest.  Public  Ownership  of  Urban  and 

Suburban  Street  Transportation 

' Twentieth  Century  Magazine.     247 


BRIEF 


Resolved,  That  municipalities  in  the  United  States  should 
own  and  operate  plants  for  supplying  light,  water,  and  trans- 
portation. 

Introduction 

I.    The  question  is  important. 

A.  Transportation  is  inseparably  connected  with  questions 

of  congestion  of  population,  slums,  and  tenements, 
and  water  and  light  concern  intimately  the  health  and 
comfort  of  the  people  and  the  safety  of  the  commu- 
nity. ♦ 

B.  Stupendous   financial  interests   are  involved. 

C.  A  vast  majority  of  every  community  is  directly  con- 

cerned. 
II.    It  is  generally  granted. 

A.  That  there  are  three  methods  by  which  municipalities 

may  deal  with  natural  monopolies. 

1.  They  may  grant  private  companies   franchises   to 

build  and  operate  plants. 

2.  They  may  build  or  purchase  plants  and  lease  them 
to  private  companies  for  operation. 

3.  They  may  own  and  operate  the  plants  themselves. 

B.  In  American  municipalities  the  first  method  is  almost 

universal  in  the  case  of  street  railways  and  quite 
common  in  the  case  of  water  and  lighting  plants. 

C.  The  question  is  whether  the  last  method  is  preferable 

to  the  others. 
III.    The  solution  of  the  question  seems  to  present  four  main 
issues. 
A.    Is  the  ownership  and  operation  of  light,  water,  and 
transportation   plants    a   municipal    function? 


xii  BRIEF 

B.  Is  the  system  of  private  ownership  of  natural  municip- 

al monopolies  in  the  United  States  objectionable? 

C.  Would   the   objectionable   features   of   private   owner- 

ship, if  they  exist,  be  remedied  by  municipal  owner- 
ship and  operation? 

D.  Does  the  experience  of  this  and  other  countries  show 

that  municipal  ownership  is  more  successful  in  prac- 
tice than  private  ownership? 

Affirmative 

The  affirmative  believes  that  municipalities  should  own  and 
operate  their  light,  water,  and  transportation  plants,  for, 
I.    The  ownership  and  operation  of  these  utilities  is  a  proper 
function  of  municipal  government. 

A.  The  ends  of  government  embrace  all  the  benefits  and 

all  the  immunities  from  evil  which  government  can 
confer. 

B.  It  is  not  socialism. 

II.    Private   ownership   is   objectionable   because   it  gives   rise 
to  great  evils. 

A.  There  is  great  waste  of  forces. 

I.     Business  is  not  regulated  by  competition. 

B.  The  public  is  plundered. 

I.    Enormous  dividends  are  secured  from  franchises 
which  belong  to  the  public. 

C.  The  public  is  dependent  on  those  who  own  the  mo- 

nopolies. . 

D.  Public  moral  standards  are  lowered  by  bribery  and 
corruption,  " 

I.    The  companies  spend  large  sums  controlling  boards 
of  aldermen. 
III.    Municipal  ownership  remedies  the  evils  of  private  owner- 
ship and  is  followed  by  great  advantages. 

A.  Plants  are  run  for  the  benefit  of  the  public. 

B.  Rates  of  service  are  lowered. 

C.  Whatever  profits  are  made  lessen  taxation. 
T).     Needless  investment  and  speculation  is  checked 


c^ 


BRIEF  xiii 

E.     Regularity  and  economy  of  administration  is  insured. 
I.     Close  watch  is  kept  by  every  taxpayer  who  is  vir- 
tually a  stockholder. 

IV.    Municipal  ownership  and  operation  is  more  successful  in 
practice   than    private   ownership   and   operation. 

A.  In  operating  water  plants.   . 

B.  In  operating  gas  plants. 

C.  In  operating  plants  for  transportation. 

■"  Negative 

The  negative  believes  that  municipalities  should  not  own  and 
operate  their  light,  water,  and  transporation  plants,  for, 

I.     Municipal  ownership  of  these  utilities  is  unwise  in  theory. 

A.  It  is  not  a  proper  function  of  government. 

I.  It  is  not  necessary  for  the  promotion  of  intel- 
ligence, the  care  of  the  unfortunate,  or  to  estab- 
lish justice. 

B.  It  increases  government  interference  in  the  field   of 

private  action. 

C.  It  deprives  industry  of  the  moral  and  economic  ad- 

vantage of  self  interest. 

II.     Municipal  ownership  is  financially  disastrous. 

A.  Waste  and  extravagance  result. 

1.  Those  in  charge  have  little  skill  or  experience. 

2.  They  have  little  interest  in  an  economic  admin- 
istration, 

B.  There   is   a   constant  tendency   to   rely   on   the  city's 

ability  to  tax  to  make  up  deficiencies. 

C.  There  is  slight  chance  of  extra  revenue. 

I.  The  clamor  for  low  rates  precludes  the  possibility 
of  extra  revenue. 

III.     Municipal  ownership  is  inefficient. 

A.  It  is   not  awake  to  new  inventions. 

B.  The  service  does  not  secure  the  best  men. 

1,  The  salary  is  insufficient. 

2.  Opportunity  for  advancement  is  too  meager. 


XIV 


BRIEF 


C.    The  service  is  subject  to  the  change  of  political  par- 
ties. 
IV.    The  present  status  of  American  city  government  precludes 
further   consideration   of  the   question. 

A.  Most   American    cities   have    failed   to    do    efficiently 

what  they  already  have  to  do. 

1.  Jobbery  and  corruption  are  common. 

2.  The  police  service  is  poor. 

3.  Laws  are  not  enforced. 

B.  To   add   to   municipal    functions   is   simply  to   aggra- 

vate  existing   conditions   and   to   delay   reforms   in- 
definitely. 


i 


BIBLIOGRAPHY 


A    star    (*)    preceding    a    reference    Indicates    that    the    entire 
article  or  a  part  of  it  has  been  reprinted  in  this  volume. 


General  References 
Bibliographies 

Brooklyn,    New   York.      Public   Library.     Books    on    Municipal 
Ownership.  27pp.   1906. 
A  useful  classified  and  annotated  list. 

Brooks,  Robert  C.  Bibliography  of  Municipal  Problems  and  City 
Conditions.    N.  Y.   1901. 
Published  also  in  Municipal  Affairs.    5:  1-346.  Mr.  '01. 

Kansas  City  Public  Library  Quarterly.  8:  21-71.  Ap.  '08.  Bibliog- 
raphy of  Municipal  Betterment. 

Municipal  Affairs,  1897-1902.  Vols.  I-VL 

Bibliography  in   every  quarterly   issue. 
Seattle.    Public    Library.    Municipal    Government,    a    List   of 

Books  and  References  to  Periodicals.     1911. 

United  States.  Library  of  Congress — Division  of  Bibliography. 
Select  List  of  Books  on  Municipal  Affairs  with  Special  Refer- 
ence to  Municipal  Ownership.   34pp.  1906. 

For  sale  by  the   Superintendent  of  Public  Documents,  Wash- 
ington,  D.    C.    Five   cents.  ^ 

Books,  Pamphlets  and  Documents 

Baker,  Moses  Nelson,  ed.  Municipal  Yearbook.  Engineering 
News   Publishing  Co.,   New  York.   1902. 

Beard,  Charles  A.  American  City  Government.  Century. 
N.  Y.     1912.     Chapter  VIII,  Municipal  Ownership. 

Bliss,  William'^D.  P.,  ed.  New  Encyclopedia  of  Social  Reform. 
1908.  Municipal  Ownership,  Gas,  Street  Railways,  Water. 


xvi  BIBLIOGRAPHY 

r  England.  Home  Office.  IMunicipal  Trading  (United  King- 
dom) ;  Return  Showing  the  Nature  and  Extent  and,  for 
Each  of  the  Last  Four  Years  (1902-3,  1905-6)  for  Which 
Figures  are  Available,  the  Financial  Results  of  Reproduc- 
tive Municipal  Undertakings,  v.  1-3  in  i.  1909. 
'  Fairlie,  John  A.  IMunicipal  Administration.  1901.  Chapter  XIL 
Municipal  Improvements. 

Fairlie,  John  A.  Essays  in  Municipal  Administration.  Macmil- 
lan.  New  York.  1908. 

Foote,  Allen  Ripley.  Municipal  Public  Service  Industries.  Other 
Side  Publishing  Company.  Chicago.   1899. 

Goodnow,  Frank  Johnson.  City  Government  in  the  United  States. 
Century.  New  York.   1904.  • 

Goodnow,  Frank  Johnson.  Municipal  Government.  Chapter  XV. 
Local  Improvements.  Century.  New  York.  1909. 

Holcombe,  A.  N.  Public  Ownership  of  Telephones  on  the 
Continent  of  Europe.    Bost.    Houghton.      1911. 

Howe,  Frederick  C.  European  Cities  at  Work.  Scrrbners. 
N.   Y.      1913. 

Illinois.  Labor  Statistics  Bureau.  Biennial  Report,  v.  10. 
Private  and  Municipal  Ownership  of  Public  Works. 

King,  Clyde  Lyndon.  Regulation  of  Municipal  Utilities.  Ap- 
pleton.  New  York.  1912.  Chapter  II.  Municipal  Owner- 
ship versus  Adequate  Regulation. 

League  of  American  Municipalities.  Book  of  American  Munic- 
ipalities. Chicago.  1908. 

Le  Rossignol,  James  E.  Monopolies,  Past  and  Present,  pp.  117- 
42.  Crowell.  1901. 

Massachusetts.  Board  of  Gas  and  Electric  Light  Commis- 
sioners.   Annual  Reports. 

Michigan  Political  Science  Association.  Publications.  5 :  349-88. 
Mr.  '04.  Suggestions  for  and  against  Municipal  Ownership 
of  Public  Utilities.  C.  A.  Kent. 

Municipal  Program.  Macmillan.  New  York.  1900. 

Munro,  William  Bennett.  Government  of  European  Cities.  Mac- 
millan. New  York.  1909. 
Bibliography,   pp.    380-402.  ^   ^  * 

*National  Civic  Federation.  Municipal  and  Private  Operation  of 

Public  Utilities.  3  Vols.  1907. 


BIBLIOGRAPHY  xvii 

New  International  Encyclopedia.  Article  on  Municipal  Owner- 
ship. 

New  York  (State).  Public  Service  Commission,  First  District. 
Annual  Reports,  1907-date. 

Pond,  Oscar  Lewis.  Municipal  Control  of  Public  Utilities,  a 
Study  of  the  Attitude  of  our  Courts  toward  an  Increase  in 
the  Sphere  of  Municipal  Activity.  (Columbia  University. 
Studies  in  History,  Economics  and  Public  Law.  15:  1-115.  '06.) 

Seabury,  Samuel.  Municipal  Ownership  and  Operation  of  Public 
Utilities  in  New  York  City.  Municipal  Ownership  Publishing 
Co.  1905. 

Shaw,  Albert.  Municipal  Government  in  Continental  Europe. 
Century.   New  York.  1895. 

Shaw,  Albert.  Municipal  Government  in  Great  Britain.  Century. 
New  York.   1895. 

Tolman,  William  H.  Municipal  Reform  IMovements  in  the 
United  States.  Revell.  New  York.  1895. 

Towler,  W.  G.  Socialism  in  Local  Government.  Ed.  2.  New 
York.    Macmillan.     1909. 

United  States.  Census  Office.  Twelfth  Census,  1900.  Special  Re- 
ports. Street  and  Electric  Railways.  439pp.  1902. 

United- States.  Commerce  and  Labor,  Department  of.  Water,  Gas 
and  Electric  Light  Plants  under  Private  and  Municipal  Own- 
ership. 983PP-  Fourteenth  Annual  Report  of  Commissioner 
of  Labor,  1900. 

Also  appears  as  House  Document  713,  56th  Congress,  1st  Ses- 
sion. 

United  States.  Commerce  and  Labor,  Department  of.  Municipal 
Ownership.  Reports  from  United  States  Consular  Officers, 
1897-1905.  55pp.  Monthly  Consular  Reports,  May,  1905.  pp. 
284-336. 

♦United  States.  Industrial  Commission.  Report.  1901.  Municipal 
Public  Utilities.  Vol.  IX. 

United  States.  Labor,  Bureau  of.  Bulletin.  12:  1-123.  Ja.  '06. 
Municipal  Ownership  in  Great  Britain.  F.  C.  Howe. 

Whinery,  S.  Municipal  Public  Works.  Municipal  Ownership, 
pp.  189-218.  Macmillan.  New  York.  1903. 

Wilcox.  Delos  F.  American  City ;  a  Problem  in  Democracy.  Chap- 
ter III.  Control  of  Public  Utilities. 


xviii  BIBLIOGR.\PHY 

Wilcox,  Delos  F.  Municipal  Franchises ;  a  Description  of  the 
Terms  and  Conditions  upon  which  Private  Corporations  En- 
joy Special  Privileges  in  the  Streets  of  American  Cities.  2v. 
Gervaise  Press.  Rochester,  New  York.  1910-11. 
>:  Zangerle,  John  A.  Larger  View  of  Municipal  Ownership.  Pub- 
lished by  the  Author.  Cleveland,   Ohio.  1906. 

Magazine  Articles 

American  City.  6:  709-13.  My.  '12.  Municipal  Housekeeping 
in  Europe  and  America.    Harvey  N.  Shepard. 

American  City.  8:. 121-38.  F.  '13.  Public  Markets  and  Market- 
ing Methods.    J.   F.   Carter. 

American  City.  8:215.  F.  '13.  San  Francisco's  Municipal 
Street  Railway.    W.  M.  Harrison. 

American  Journal  of  Sociology.  11 :  817-29.  My.  '06.  jMunicipal 
Activity  in  Britain.  T.  D.  A.  Cockerell. 

♦American  Journal  of  Sociology,  12 :  241-53.  S.  '06.  Municipal 
Ownership  and  Operation;  the  Value  of  Foreign  Experience. 

Leo  S.  Rowe. 

Published  also  in  National   Municipal  League,   Proceedings   of 

the    Atlantic    City    Conference    for    Good    City    Government,    1906. 

pp.  280-90. 

American  Political  Science  Review.  5:374-93.  Ag.  '11.  Cen- 
tral Utilities  Commissions  and  Home  Rule.    E.  H.  Meyer. 

Annals  of  the  American  Academy.  2"/:  20-36.  Ja.  '06.  Water,  Gas 
and  Electric  Light  Supply  of  London.  Percy  Ashley.  - 

Annals  of  the  American  Academy.  28 :  359-70.  N.  '06.  Municipal 
Ownership  as  a  Form  of  Governmental  Control.  F.  A.  Cleve- 
land. 

*Annals  of  the  American  Academy.  29:  275-91.  Mr.  '07.  Public 
Regulation  of  Street  Railway  Transportation.  Edmond  R. 
Johnson. 

Annals  of  the  American  Academy.  30:  557-92.  N.  '07.  Relation 
of  the  Municipality  to  the  Water  Supply;  Symposium. 

Arena.  Public  Ownership  News.  See  IMonthly  Numbers  of  the 
Arena  from  ]\iay,  1901  to  August,  1909. 

Arena.  31 :  448,  458-63.  My.  '04.  Municipal  Ownership  versus 
Private   Ownership.   Frederick   F.    Ingram. 


BIBLIOGRAPHY 


XIX 


Arena.  2>7 '•  181-90.  F.  '07.  Opposing  Views  on  Municipal  Owner- 
ship ;   a  Notable   Symposium. 

Atlantic  Monthly.  107:433-40.  Ap.  '11.  Tendency  of  Municipal 
Government  in  the  United  States.    G.  B.  McClellan, 

Cassier's  Magazine.  32:  3-1 1,  178-85,  237-49.  ]\Iy.-Jl.  '07.  Munic- 
ipal Ownership  in  England.  R.  S.  Hale. 

*Des  IMoines  Register  and  Leader.  Ag.  26,  '08.  What  the  Public 
Does   Not   See.     Henry  L.    Doherty. 

*Engineering  Magazine.  31 :  741-3.  Ag.  '06.  Municipal  Owner- 
ship of  Engineering  Utilities.     E.  W.  Burdett. 

Condensed  from  an  address  delivered  before  the  National  Elec- 
tric Light  Association. 

Fortnightly  Review.  89:  489-511.  Mr.  '08.  London's  Electrical 
Future.  T.  H.  Minshall. 

Independent.  60:  1153-7.  My.  17,  '06.  First  Municipal  Street  Rail- 
way in  America.   A.   M.   Parker. 

International  Quarterly.  12:  1-12.  O.  '05.  Public  Ownership  in 
New  York.  E.  B.  Whitney. 

Municipal  Affairs.  6:  524-38.  '03.  Recent  History  of  Municipal 
Ownership  in  the  United  States. 

♦Nation.  82:  441-2.  My.  31,  '06.  Municipal  Ownership  Inves- 
tigators. 

Nation.  83 :  386-7.  N.  8,  '06.  Case  of  Municipal  Ownership. 

National  Municipal  Review.  2:  11-23.  Ja.  '13.  State  vs.  Munic- 
ipal Regulation  of  Public  Utilities.  John  Morton  Eshel- 
man. 

National  Municipal   Review.   2:24-30.   Ja.  '13.    State  vs.   Mu- 
nicipal  Regulation   of   Public  Utilities.    Lewis   R.  Works. 
'*Outlook.  80:  266-8.  Je.  3,  '05.  Municipal  Ownership. 
^♦Outlook.  82:  504-11.  Mr.  3,  '06.  Principles  of  Municipal  Own- 
ership.  Robert   Donald. 
^  *Outlook.  86:  49-51-  My.  11,  '07.  Problem  of  ^Municipal  Owner- 
ship. 
'  Outlook.  86:   621-3.   Jl.  27,   '07.   Municipal   Ownership,   Pro   and 
Con ;  the  Report  of  the  National  Civic  Federation's  Commis- 
sion. 1 

Political  Science  Quarterly.  17:  643-68.  Ag.  '03.  Holyoke  Case. 
A.  D.  Adams. 


XX  BIBLIOGRAPHY 

Political  Science  Quarterly.  24:  23-56.  Mr.  '09.  Municipal  So- 
cialism and  its  Economic  Limitations,  with  Special  Reference 
to  the  Conditions  in  New  York  City.     E.  J.  Levy. 

Political  Science  Quarterly.  26:  122-32.  Mr.  '11.  Electric 
Lighting  System  of  Paris.    A.  N.  Holcombe. 

Quarterly  Journal  of  Economics.  23:  161-74.  N.  '08.  Civic  Fed- 
eration Report  on  Public  Ownership.  W.  B.  Munro. 

♦Quarterly    Review.    205 :    420-38.    O.    '06.    Municipal    Socialism. 

♦Quarterly  Review.  209:  409-31.  O.  '08.  Municipal  Trade.  Leonard 
Darwin. 

Review  of  Reviews.  35 :  32g-^2>-  ^Ir.  '07.  Municipal  Ownership 
of  Street  Railways  in  Germany.    E:  T.  Heyn. 

Scientific  American.  96:  430.  My.  25,  '07.  How  Chicago  Is  Solving 
Municipal  Ownership  of  Transportation  Facilities.  A.  F. 
Collins. 

Scribner's  Magazine.  40:  98-109.  Jl.  '06.   Glasgow.  F.   C.  Howe. 

♦Springfield  Republican.  Ap.  10,  '07.  Public  Service  Enterprises. 

Survey.  22:  803-4.  S.  11,  '09.  Socialism  in  Local  Government. 
W.   G.  Towler.   Review. 

World  To-Day.  19:  957-64-  S.  '10.  City  and  the  Public  Utility 
Corporation.   Brand  Whitlock. 

Affirmative  References 

Books  and  Pamphlets 

American   Economic  Association.    Publications,   1906,   3d   Series. 

9'  113-33-  Case  for  Municipal  Ownership.  F.  C.  Howe. 
Baker,   Charles   Whiting.   Monopolies   and   the   People.   Macmil- 

lan.  New  York.  1899. 
Bemis,   Edward  Webster,  ed.     ^Municipal   Monopolies.     Crowell. 

New  York.  1899. 

Papers    by    experts    on    waterworks,    lighting,    telephone    and 
street   railways. 
Bemis,   Edward  Webster,    Municipal    Ownership  of  Gas  in   the 

United  States.    Macmillan.    New  York.    1891. 

♦Calgary,   Alberta,   Canada.    City   Clerk.    Municipal   Manual, 

1913. 


BIBLIOGRAPHY  xxi  - 

Commons,  John  Rogers.  Social  Reform  and  the  Church.  Munic- 
ipal ]\Ionopolies.  pp.  123-55.    Crowell.  1894. 

Conference  for  Good  City  Government,  1910:  12-21.  Con- 
servation in  Municipalities.    W.  D.  Foulke. 

Conference  for  Good  City  Government,  1910:  156-69.  Kansas 
City  Franchise   Fight.    J.  W.   S.   Peters. 

Cook,  W.  W.  Corporation  Problem.  Corporations  as  Owners  of 
Natural   Monopolies,   pp.   208-13.   Putnams.   New   York.    1891. 

Dolman,   Frederick.   Municipalities   at  Work.    Methuen.   London. 

1895. 

Howe.  Frederick  Clemson.  British  City.  Scribrier's.  New  York. 
IQ07. 

Howe,  Frederick  Clemson.  City  the  Hope  of  Democracy.  Scrib- 
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National  Convention  upon  Municipal  Ownership  and  Public 
Franchises.  Proceedings,  New  York  City,  1903  (in  Mu- 
nicipal Afifairs,  v.  6,  no.  4). 

National  Municipal  League,  Proceedings  of  the  Atlantic  City 
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eration  in   Duluth,   Minnesota,   pp.  244-8. 

National  Municipal  League,  Proceedings  of  the  Atlantic  City 
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National  Municipal  League,  Proceedings  of  the  Atlantic  City 
Conference  for  Good  City  Government,  1906.  One  Maj^or's 
Experience ;  Municipal  Ownership  in  Nashville,  Tennessee. 
James  M.   Head.  pp.  269-79. 

Parsons,  Frank.  City  for  the  People,  C.  F.  Taylor.  Philadelphia. 
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*Regina,  Saskatchewan,  Canada.    City  Clerk.    Municipal  Man-- 
ual,    1913- 

Rowe,  Leo  Stanton.  Problems  of  City  Government.  Appleton, 
New  York.  1908. 

Shaw,  George  Bernard.  Common  Sense  of  Municipal  Trad- 
ing.   Lane.    New  York.    191 1. 

♦Winnipeg,  Manitoba,  Canada.  City  Clerk.  Municipal  Man- 
ual,  1913. 


xxii  BIBLIOGRAPHY 

Zueblin,  Charles.  American  Municipal  Progress.  Chapter  X. 
Public  Control,  Ownership  and  Operation.  Macmillan.  New 
York.  1902. 

Magazine   Articles 

American  City.  6:411-9.  Ja.  '12.  German  City  Worthy  of 
Emulation.    W.   D.   Foulke. 

American  City.  7:  140.  Ag.  '12.  Town  Without  Municipal 
Tax<:s.     (Silverton,   Colorado). 

American  City!  7:424-6.  N.  '12.  Twenty  Years  of  Successful 
Municipal    Ownership    in    South    Norwalk,    Connecticut. 

American  Magazine.  61 :  685-96.  Ap.  '06.  From  Yerkes  to 
Dunne;  how  Chicago  is  Trying  to  Evolve  Municipal  Owner- 
ship out  of  the  Worst  Traction  Problem  in  the  World.  H.  K. 
Webster. 
'^  Annals  of  the  American  Academy.  27 :  1-19.  Ja.  '06.  Glasgow's 
Experience  with  Municipal  Ownership  and  Operation.  Robert 
Crawford. 

*Annals  of  the  American  Academy.  27 :  37-65.  Ja.  '06.  Munic- 
ipal Ownership  and  Operation  of  Street  Railways  in  Germany. 
Leo  S.  Rowe. 

Annals  of  the  American  Academy.  27 :  72-90.  Ja.  '06.  Movement 
for  ]\Iunicipal  Ownership  in  Chicago.  Hugo  S.  Grosser. 

Arena.  32:  461-71.  N,  '04.  Glasgow's  Great  Record.  Frank  Par- 
sons. 
Same   article  condensed.   Review  of  Reviews.   30:   733-4.  D.   '04. 

*Arena.  34:  645-6.  D.  '05.  Fifteen  Reasons  why  the  People  Should 

Own  Their  Own  Public  Utilities.    Frank  Parsons. 
-'-Arena.  35:  526-7.  My.  '06.  Five  Reasons  why  We  Favor  Municipal 

Ownership. 
Arena,  38:  401-8.  O.  '07.  National  Civic  Federation  and  its  New 

Report  on   Public-Ownership.   Frank  Parsons. 
Chautauquan.    62:  19-32.    Mr.   '11.    Municipal    Ownership.    P. 

Alden. 

Published    also   in   Alden's  Democratic   Eng-land. 
Chautauquan.    62:  103-10.    Mr.    '11.    Municipal    Ownership    in 

the  United  States.    C:   Zueblin. 


BIBLIOGRAPHY 


XXlll 


*City  Hall.  2:  225-7.  Ja.  '10.  Argument  for  the  ^Municipal  Own- 
ership of  a  Street  Railway  Company, 

Contemporary  Review.  S3  :  485-500,  623-39.  Ap.-^NIy.  '03.  Case  for 
Municipal  Trading.  Robert  Donald. 

Contemporary  Review.  84:  12-32.  Je.  '03.  The  Trust  or  the  Town. 
Robert  Donald. 

♦Cosmopolitan.  30:  557-60.  ]\Ir.  '01.  Advantages  of  Public  Own- 
ership and  Management  of  Natural  Monopolies.  Richard  T. 
Ely. 

Independent.  52:  884-5.  Ap.  5,  '00.  Austin,  Texas  Argument  a- 
gainst   Municipal   Ownership. 

♦Independent.  60 :  449-52.  F  22,  '06.  Municipal  Ownership  a  Bles- 
sing.   John   Burns. 

♦Independent.  61 :  927-30.  O,  18,  '06.  Our  Fight  for  Municipal 
Ownership.  Edward  F.  Dunne. 

Independent.  71:798-803.  Privilege  Becomes  Property  under 
the  Fourteenth  Amendment;  the  Consolidated  Gas  Deci- 
sion. J.  F.   Orton. 

International  Quarterly.  12:  13-22.  O.  '05.  Chicago  Traction 
Question.  Clarence  S.  Darrow. 

♦Lincoln,  Nebraska.  State  Journal.  My.  12,  '07.  Municipal  Own- 
ership. W.  A.  .Selleck. 

♦North  American  Review.  172:  ^45-55.  Mr.  '01,  Municipal  Own- 
ership of  Natural  Monopolies.  Richard  T.  Ely. 

♦North  American  Review.  182:  701-8.  jNIy.  '06.  ]\Iunicipal  Own- 
ership of  Public  Utilities.  George  Stewart  Brown. 
Same  article  condensed.  Review  of  Reviews.   33:  724-5.   Je.   '06. 

♦Outlook.  70 :  726-7.  Mr.  22,  '02.  Municipal  Ownership  and  Cor- 
rupt Politics.  Henry  C.  Adams. 

Outlook.  74:  11-3.  ]\Iy.  2,  '03.  Public  Ownership  Conflicts. 

Outlook.   76:   965-7.   Ap.   22,   '04.   Fear  of   Municipal   Socialism. 

Outlook.  79:  931-4.  Ap.  15,  '05.  Shall  New  York  Own  its  Sub- 
ways? R.  Fulton  Cutting. 

Outlook.  79:  934-8.  Ap.  15.  '05.  Shall  New  York  Own  its  Sub- 
ways? Bird  S.  Coler. 
"^♦Outlook.  80:  411-3.  Je.  17,  '05.  Municipal  Ownership. 

♦Outlook.  80:  431-5.  Je.  17,  '05.  Municipal  Ownership  of  Street 
Railways  in  Glasgow.  Robert  Donald. 


xxiv  BIBLIOGRAPHY 

Outlook.  82:  818-9.  Ap.  14,  '06.  Chicago's  Municipal  Ownership 
Battle. 

Outlook.  82:  835-41.  Ap,  14,  '06.  Boston  Franchise  Contest. 
Robert  A.  Woods  and  Joseph  B.  Eastman. 

Outlook.  83 :  618-20.  Jl.  14,  '06.  Why  German  Cities  are  Beauti- 
ful and  Healthful.  W.  H.  Tolman. 

♦Outlook.  86:  49-51.  My.  11,  '07.  Problem  of  Municipal  Owner- 
ship. 

*Reader.  7:  477-84.  Ap.  '06.  Municipal  Ownership — What  It 
Means.     Edw'ard  F.  Dunne. 

Twenti  th  Centur\^  Magazine,  i:  3-12.  O.  '09.  What  Happened  in 
Pasadena.   F.    M.   Elliott. 

Twentieth  Century  Magazine,  i :  127-31.  N.  '09.  Story  of  Los 
Angeles  Waterworks  under  Private  and  Public  Ownership. 
F.  M.  Elliott. 

Twentieth  Century  Magazine.  3:  173-5.  N.  '10.  Public  Ownership 
in  Seattle.  L.  B.  Youngs. 

Twentieth  Century  ]\Iagazine.  7:3-8.  N.  '12.  Study  in  Despot- 
ism; How  a  Highly  Reputed  Street  Railway  Monopoly 
Had  to  Be  Beaten  to  Its  Knees  in  Order  That  Its  Em- 
ployees ]\Iight  Enjoy  a  Right  Conferred  by  Law.  Livy  S. 
Richard. 

♦Twentieth  Century  Magazine.  7: 8-15.  N.  '12.  Municipal 
Lighting.     C.   M.    Sheehan   and  Albert   Firmin. 

♦Tw'Cntieth  Century  Magazine.  7:27.  N.  '12.  Public  Owner- 
ship of  Urban  and  Suburban  Street  Transportation.  H. 
D.   Lloyd. 

Twentieth  Century  Magazine.  See  also  Public  Ownership  News 
in  monthly  numbers. 

'Negative  References 
Boohs  and  Pamphlets 

American    Economic   Association   Publications,    1906.   3d    Series. 

9*  133-43-  Municipal  Ownership.  Winthrop  M.  Daniels. 
Avebury,  John  Lubbock,  ist  Baron.  On  ^Municipal  and  National 

Trading.  ]\lacmlllan.  New  York.  1907, 


BIBLIOGRAPHY  xxv 

Grant,  Arthur  Hastings.  Comp.  List  of  Defunct  Municipal 
Lighting    Plants.    Ed.   8.    Municipal    Ownership    Pub.    Co. 

1913- 

Knoop,  Douglas.  Principles  and  Methods  of  Municipal  Trad- 
ing.   New    York.    Macmillan.     1912. 

Meyer,  Hugo  Richard.   ]\Iunicipal   Ownership  in  Great   Britain. 
Macmillan.  New  York.  1906. 
Reviewed  in  Political  Science  Quarterly.  22:  528-32.   S.   '07. 

Porter,  Robert  Percival.  Dangers  of  ^Municipal  Ownership.  Cen- 
tury. New  York.  1907. 

Seligman,  Edwin  Robert  Anderson.  Principles  of  Economics. 
Development  of  Public  Ownership,  pp.  562-75.  1905. 

Magazine  Articles 

American  Journal   of  Sociology.  3 :  837-47.   My.   '98.   New   Plan 

for  the  Control  of  Quasi-public  Works.  J.  D.  Forrest. 
*American  Journal   of    Sociology.    10 :    787-813.    My.   '05.    Public 

Ownership  versus  Public  Control.  Hayes  Robbins. 

Includes  a  comparison  of  street  railways  of  Boston  and  Glas- 
gow, and  an  account  of  the  workings  of  the  Massachusetts  Rail- 
way Commission. 

*American  Journal  of  Sociology.  12:  328-40.  N.  '06.  Public  Own- 
ership and  Popular  Government.  William  H.  Brown. 

*Annals  of  the  American  Academy.  28 :  371-84.  N.  '06.  American 
Municipal  Services  from  the  Standpoint  of  the  Entrepreneur. 
Chester  Lloyd  Jones. 

City  Hall.  11  :  366-7.  Je.  '10.  ]\Iunicipal  Ownership  in  Vienna. 
Robert  Atter. 

*Engineering  ^Magazine.  34:  509-11.  D.  '07.  Comparison  of  the 
Cost  of   Steam   Power  in  Municipal  and  Privately   Operated 

Plants.  John  W.  Hill. 

Condensed  from  an  address  given  before  the  Central  States 
TTaterworks   Association. 

Harper's  Weekly.  51 :  1344,  1357-  S.  14,  '07.  Problem  of  ^Munic- 
ipal  Ownership ;  the  Report  of  the  Public  Ownership  Com- 
mission  of  the   National   Civic   Federation.   Roland    Phillips. 

♦Journal  of  Commerce.  Jl.  16,  '07.  Main  Question  in  Municipal 
Ownership. 

Journal  of  Political  Economy.  13:  481-505.  S.  '05.  Municipal 
Ownership  in  Great  Britain.  Hugo  R.  Meyer. 


xxvi  BIBLIOGRAPHY 

*Journal  of  Political  Economy.  14:  257-314.  My.  '06.  Municipal 
Ownership  in  Great  Britain,  Everett  W.  Burdett. 

Journal  of  Political  Economy.  14:  553-67.  N.  '06.  Municipal  Own- 
ership in  Germany;  Street  Railways  and  Electric  Lighting. 
Hugo  R.   Meyer, 

Municipal  Affairs.  6:  539-78.  '02.  European  and  American  Re- 
sults Compared.  Robert  P,   Porter. 

Municipal  Affairs.  6:  579-613.  '02.  Recent  Attacks  on  Municipal 
Ownership  in  Great  Britain.  Robert  Donald. 

Chautauquan.  40:  548-57,  F.  '05.  German  Municipal  Social  Ser- 
vice.    Howard   Woodhead. 

*North  American  Review.  182 :  853-60.  Je.  '06.  Arguments  a- 
gainst  IMunicipal  Ownership.  F.  B.  Thurber. 

North. American  Review,  183:  729-36.  O.  '06.  How  London  Loses 
by    Municipal    Ownership.    Ernest    E.    Williams. 

North  American  Review.  184:  590-603.  Mr.  '07.  Municipal  Glas- 
gow. Benjamin  Taylor. 

Outlook.  82:  765-6.  Mr,  31,  -'06.  Street  Railways;  Boston  and 
Glasgow. 

Outlook.  92:  407-13.  Je,  19,  '09.  City  gets  Fifty-five  Per  Cent; 
the'  Fourth  Plain  Tale  from  Chicago.    C.  Norman  Fay. 

Public  Service   (monthly).  Chicago. 

A  corporation  organ,  its  object  being  to  prevent  municipal  own- 
ership. 
^  *Quarterly  Review.  205 :  420-38.  O.  '06.  IMunicipal  Socialism. 

*Quarterly  Review,  209:  409-31,  O.  '08,  Municipal  Trade.  Leon- 
ard Darwin. 

*Review  of  Reviews.  36 :  594-8.  N.  '07.  How  Boston  Solved  the 
Gas  Problem.  Louis  D.  Brandeis. 

World  To-Day.  7:  1536-42.  D.  '04.  Philadelphia  and  its  Gas- 
w-orks.    Hayes  Robbins. 

*World  To-Day.  12:  374-9.  Ap.  '07.  Municipal  Ownership  of 
Electric  Light  Plants.  James  R.  Cravath. 

*World  To-Day.  12:  621-5.  Je.  '07.  Municipal  Ownership  of  Pub- 
lic Utilities,    John  W,  Hill, 

World  To-Day,  13:  1037-40,  O.  '07.  Philadelphia  Gas  Works  un- 
der Private  Operation,  T:  L.  Hicks. 


•      •   •      •    •   •       ■ 


•      ••  •    •  •.  .  *.  •  :  •%  •  •  •• 

.  .   ......    •••.%••,,,•, 


SELECTED  ARTICLES  ON 
MUNICIPAL  OWNERSHIP 


INTRODUCTION 


Present  Status  of  Municipal  Ownership 

The  municipality,  as  we  are  familiar  with  it  in  America 
to-day,  is,  like  the  great  corporation,  a  product  of  our  wonder- 
ful development.  Early  statesmen  did  not  and  could  not  foresee 
the  possibilities,  problems,  and  dangers  that  characterize  present 
day  municipal  institutions.  The  lack  of  similarity  between  the 
conditions  that  prevail  in  our  different  cities  renders  municipal 
problems  more  difficult.  Each  city  is  organized  under  a  different 
charter  and  is  a  problem  in  itself.  A  plan  that  would  be  success- 
ful in  one  might  entirely  fail  in  another. 

There  is  a  growing  tendency,  however,  to  extend  municipal 
activity  to  include  those  enterprises  that  involve  moral,  hygienic, 
social,  and  educational  questions ;  altho  there  is  difference  of 
opinion  as  to  just  how  much  importance  should  be  given  these 
various  considerations. 

Functions  of  the  Municipality 

The  state  and  federal  governments  must  solve  those  political 
and  economic  questions  that  in  their  nature  are  broad  in  scope 
and  policy  and  require  extended  legislation,  administration,  and 
adjudication.  On  the  other  hand,  the  city  works  in  a  limited  ter- 
ritory and  is  chiefly  concerned  with  the  details  of  its  own  needs 
and  the  problems  growing  out  of  those  needs — problems  greatly 


2,    ,  SEIxECTED    ARTICLES 

intensified  by  the  larger  number  of  people  crowded  into  a  small 
area.  For  example,  the  ownership  of  interstate  railroads  creates 
a  problem  less  pressing  than  the  ownership  of  city  transporta- 
tion facilities.  It  may  be  necessary  for  the  city  to  own  and  oper- 
ate the  latter  in  order  to  relieve  congested  conditions  and  to  allevi- 
ate the  slum  and  tenement  evils.  No  such  reasons  could  be 
urged   for  the  ownership  of  interstate  railways. 

Authorities  and  the  Issue 

The  arithmetical  facts  as  to  the  financial  status  of  municipal 
ownership  may  be  gleaned  by  the  student  from  this  book  and 
from  many  other  sources.  Here  again,  authorities  will  not  agree 
as  to  the  figures  or  their  bearing  on  the  issue.  Each  authority 
writes  from  his  own  point  of  view  and  gathers  data  and  inter- 
prets it  to  favor  the  conditions  that  he  wishes  to  prevail.  It  is 
for  the  student  to  study  each  case  painstakingly  and  thoroly  be- 
fore he  makes  his  conclusion.  He  must  not  assume  that  because 
municipal  ownership  has  been  a  success  in  one  community  it  will 
succeed  in  another  or  vice  versa  until  he  has  shown  that  the  con- 
ditions which  determine  its  success  or  failure  are  the  same  in 
both  cases. 

The  issue  before  the  student  is :  Are  the  utilities  in  question 
of  such  a  nature  that  their  operation  is  a  municipal  function  and, 
all  things  considered — condition  of  municipal  politics  and  finance, 
the  cost  of  operation,  and  the  probabilities  of  success, — is  it  bet- 
ter morally,  socially,  and  economically  ,for  American  municipal- 
ities to  own  and  administer  these  utilities? 


•  •'   •   •    *   • 
.  »  »  »   •     «, 


GENERAL  DISCUSSION 


United    States    Industrial    Commission.     1901. 
Report.  Volume  IX.  Introduction,  pp.  239-41. 

Municipal    Public    Utilities.      General    Discussion    of    Regulation 

and  Public  Ownership. 

Importance  of  Problem. 

Professor  Edward  W.  Bemis,  of  the  Bureau  of  Economic  Re- 
search, says  that  the  problem  of  municipal  public  utilities  is  made 
important  by  the  fact  that  competition  has  broken  down  under 
them  and  that  they  are  virtually  monopolies.  The  same  problems 
are  already  confronting  us  in  cities  as  will  later  become  con- 
spicuous regarding  railroads,  and  the  experience  in  the  manage- 
ment of  public  utilities  in  cities  will  be  a  valuable  lesson.  The 
magnitude  of  the  problem  may  be  judged  from  the  fact  that  the 
capital  of  the  privately  owned  water,  gas,  and  electric  plants  in 
the  country  is  nearly  $1,400,000,000,  while  the  capital  of  street 
railways  is  $1,800,000,000.  The  further  fact  that  certain  syndi- 
cates and  individuals  are  getting  controlling  interests  in  the 
street  railway,  gas,  and  electric-light  companies  of  very  many 
different  cities  increases  the  importance  of  the  problem. 

Tendency  of  Public  Utilities  toward  Monopoly. 

Professor  Bemis  declares  that  competition  in  the  street  rail- 
ways, electric  light,  and  water  supply  business  has  almost  en- 
tirely broken  down.  Efforts  have  been  made  in  the  most  im- 
portant cities  in  this  country  to  maintain  competing  companies, 
but  in  nearly  every  instance  the  experiment  has  ended  in  con- 
solidation. The  tendency  toward  consolidation  has  been  slightly 
less  marked  in  the  case  of  electric-light  companies,  but  consolida- 
tion has  still  gone  on  very  rapidly,  and  in  most  cities  street  light- 


4  ,  SELECTED    ARTICLES 

ing  and  household  lighting  are  furnished  by  a  single  corporation, 
altho  large  establishments  are  able  to  supply  themselves  by 
means  of  private  plants. 

Consolidation  of  plants  of  this  sort  results  in  great  economies. 
There  is  a  saving  in  office  force,  in  avoiding  the  duplication  of 
mains,  pipes,  and  wires,  in  the  collection  of  bills,  and  in  other 
ways. 

Consolidation  of  Plants  of  Same  or  Similar  Character. 

Professor  Bemis  says  that  in  recent  years  there  has  been  a 
marked  tendency  toward  the  concentration  of  ownership  of  plants 
in  different  cities  and  of  plants  of  different  character  in  the  same 
city.  Thus  in  New  York  City  the  Consolidated  Gas  Company 
increased  its  stock  in  July,  1900,  to  $80,000,000,  and  bought  up 
the  other  gas  and  electric  light  companies  of  that  city.  The  same 
syndicate  has  also  a  controlling  interest  in  the  street  surface 
railways  of  New  York,  altho  the  elevated  roads  are  in  the  hands 
of  a  different  syndicate.  The  Elkins-Widener-Whitney  syndicate 
also  controls  the  street  railways  of  Philadelphia,  Chicago,  and  a 
rapidly  increasing  number  of  other  cities.  Similarly,  the  United 
Gas  Improvement  Company  of  Philadelphia  has  a  controlling 
interest  in  the  gas  companies  of  over  40  different  cities,  among 
them  Jersey  City,  Kansas  City,  and  Atlanta.  The  officers  of  the 
Standard  Oil  Company  have  also  a  very  large  interest  in  gas  and 
street  railway  enterprises  all  over  the  country.  In  Chicago  the 
surface  railroads  and  several  of  the  elevated  railroads  have  been 
at  times  in  the  past,  and  doubtless  will  be  in  the  future,  owned 
by  a  single  syndicate. 

Mr.  Allen  Ripley  Foote  advocates  the  consolidation  of  the 
gas  and  electric-light  plants  of  a  municipality,  and  also  the  con- 
solidation of  the  electric  street  railways  with  the  electric-light 
plants.  It  would  make  a  saving  in  the  cost  of  management  and 
would  cheapen  the  cost  to  the  consumer. 

In  dealing  with  a  consolidated  syndicate,  however,  there 
should  be  thoro  control  of  capitalization  to  prevent  stock  water- 
ing, and  thoro  publicity  of  accounts.  Without  such  system  of 
public  accounting  consolidation  might  not  be  beneficial  to  any- 
body but  the  syndicates  themselves. 


MUNICIPAL    OWNERSHIP  5 

f' 

Possible  Methods  of  Managing  Public  Utilities. 

Professor  Bemis  says  that  there  are  three  possible  methods  of 
solving  the  problem  of  public  municipal  utilities.  One  is  to  regu- 
late the  private  operation  of  them ;  another  is  direct  public  owner- 
ship and  operation,  while  a  third  is  public  ownership  with  private 
operation.  Regulation  of  private  ownership  has  been  most  ad- 
vanced in  England  and  Massachusetts ;  public  ownership  has 
gone  furthest  in  England,  while  the  system  of  public  ownership 
and  private  operation  scarcely  exists  in  the  United  States,  but 
is  very  common  in  England. 

Comparison    of    Public    and    Private    Ownership    of    Municipal 

Utilities. 

Professor  Bemis  declares  that  there  are  certain  evils  and 
dangers  in  public  management  to  be  carefully  guarded  against, 
but  he  still  believes  that  progress  lies  in  the  direction  of  public 
management  of  municipal  utilities.  Private  companies  in  Eng- 
land do  not  oppose  the  public  as  they  do  here.  Since  the  Brook- 
lyn Bridge  Railway  has  been  taken  over  by  private  management 
there  is  a  great  deal  more  dissatisfaction  than  ever  before,  while 
under  public  management  for  many  years  it  had  given  universal 
satisfaction. 

Professor  Bemis  holds  that  the  principle  of  municipal  owner- 
ship of  gas,  electric  lights,  and  street  railways  is  the  same  as  that 
in  respect  of  water  supply,  which  is  generally  considered  a  public 
function,  but  that  it  is  more  a  question  of  expediency  as  to  how- 
fast  we  should  go  in  relation  to  those  utilities.  He  does  not  be- 
lieve all  industries  should  be  owned  and  controlled  by  the  people, 
but  where  competition  breaks  down  of  its  own  weight  and 
monopoly  thus  results,  then  the  public  must  control  it  in  some 
way.  We  should  begin  by  learning  thru  publicity  of  accounts 
what  profits  these  monopolies  are  making  and  by  seeing  what  can 
be  done  thru  regulation  and  taxation ;  but  experiments  in 
municipal  operation  should  be  at  once  undertaken  and  the  causes 
of  success   or   failure  carefully   studied. 

Mr.  Foote  thinks  that  in  a  sense  the  socialistic  idea  is  the 
basis  of  the  initial  point  in  the  advocacy  of  municipal  ownership. 


6  SELECTED    ARTICLES 

The  people  feel  that  the  public  should  have  the  benefits  and  the 
profits,  if  there  are  any,  in  the  operation  of  the  quasi-public 
plants,  and  that  private  corporations  have  been  making  excessive 
profits  and  have  exercised  more  or  less  venality,  not  only  in  the 
securing  of  their  franchises,  but  also  in  the  operation  of  the 
plants. 

Mr.  Foote  asserts  that  it  is  impossible  to  compare  the  results 
of  a  municipal  or  political  monopoly  with  those  of  the  properly 
supervised  private  industrial  monopoly.  When  the  water  works 
are  under  private  ownership,  everything  has  to  be  paid  for  by 
private  capital  in  the  way  of  extending  lines  and  making  improve- 
ments, etc.,  and  the  rates  have  to  be  sufficient  to  pay  all  operating 
expenses  and  whatever  profit  is  made.  If  the  municipalities 
should  buy  these  works,  they  would  frequently  reduce  the  price 
to  the  consumer,  but  would  make  up  the  dift'erence  by  taxation. 
They  w^ould  especially  extend  the  service  lines  and  charge  the 
cost  to  special  improvement  assessments  on  property  rather  than 
to  consumers.     The  city  does  not  have  to  earn  profits. 

As  to  whether  there  is  any  advantage  in  municipal  ownership,, 
assuming  honesty  of  operation  in  both  cases  and  the  same  ele- 
ments of  cost,  etc.,  there  are  not  sufficient  data  at  hand  to  reach 
a  conclusion,  and  they  cannot  be  obtained  without  having  the 
accounts  of  the  municipalities  and  quasi-public  corporations 
public  and  uniform.  The  witness,  however,  does  not  think  the 
business  of  the  municipalities  of  the  country  is  yet  sufficiently 
developed  to  permit  the  satisfactory  operation  of  their  public 
utilities  by  the  taxpayers.  As  yet  it  always  costs  more  to  do^ 
public  business  than  to  do  private  business  of  the  same  nature. 

Mr.  Foote  says  further  that  if  it  were  possible  to  get  men 
sufficiently  patriotic  to  work  for  the  people  as  a  whole  as  loyally 
as  they  would  in  their  own  business,  municipal  ownership  would 
be  very  desirable ;  but  such  a  condition  does  not  exist,  and  when 
the  factor  of  self-interest  is  eliminated  from  industrial  manage- 
ment there  is  eliminated  at  the  same  time  the  factor  of  efficiency. 
The  witness  has  never  yet  seen  an  industry  so  well  managed 
by  the  public  but  that  a  set  of  private  men,  having  the  same 
opportunities  in  the  details  of  management,  could  operate  it  and 
make  a  profit,  and  give  the  price  as  low,  if  not  lower. 


MUNICIPAL   OWNERSHIP  7 

Mr.  Foote  believes,  however,  that  there  are  more  reasons 
why  waterworks  should  be  managed  by  municipalities  than  any 
other  of  the  public  utilities,  because  there  are  more  regulations 
required  in  the  operation  of  these  plants  that  partake  of  the 
nature  of  police  regulations.  He  sees  no  reason,  indeed,  why  a 
small  municipality  might  not  operate  its  own  waterworks  plant 
more  economically  than  a  private  company,  because  in  a  small 
plant  the  duties  of  the  officials  of  the  private  company  would  be 
so  light  that  to  pay  any  sort  of  a  salary  to  them  the  cost  of 
operation  would  be  high;  whereas,-  if  the  plant  were  operated 
by  a  municipality,  the  work  could  be  performed  by  officials  of 
the  municipality  who  had  other  municipal  duties  to  do. 

Mr.  Foote  says  that  if  the  theory  of  municipal  ownership 
should  be  adopted  he  would  recommend  the  management  by  the 
municipality  of  every  public  utility  where  an  economic  gain  could 
be  made  to  the  public ;  but  he  would  still  insist  that  the  accounts 
of  the  municipalities  should  be  kept  in  such  a  way  that  it  could 
always  be  ascertained  what  the  actual  cost  of  construction  and 
of  the  management  of  the  plant  would  be.  He  instances  several 
cases  of  municipalities  owning  and  operating  certain  utilities  in 
which  the  accounts  were  so  kept  that  while  on  the  face  of  the 
records  there  seemed  to  be  great  economy  in  such  operation, 
yet  as  a  matter  of  fact  they  had  been  operating  less  cheaply 
than  a  private  corporation  could  have  done. 

Political  Effects  of  Extension  of  Public  Ownership. 

Professor  Bemis  asserts  that  whenever  there  has  been  a 
failure  of  any  municipal  public-service  pFant,  such  failure  can  be 
traced  generally  to  the  spoils  system  in  politics  or  to  a  lack  of 
general  business  sense  in  the  council,  which  has  led  to  the  selec- 
tion of  poor  managers,  or  to  the  plant  not  being  properly 
equipped.  A  proper  reform  in  the  civil  service  would  show  the 
people  that  they  could  improve  the  government,  and  have  it 
practically  useful  in  a  cooperative  way,  by  cheapening  transporta- 
tion, fuel,  light,  telephone,  and  telegraph  service.  Moveover,  an 
increase  in  public  functions  increases  the  popular  inter-est  in  hav- 
ing  the   government   better   managed. 


8  SELECTED   ARTICLES 

Professor  Bemis  thinks  the  efforts  of  the  influential  and 
wealthy  companies  to  keep  their  own  old  franchises,  or  get  better 
ones,  or  to  escape  their  share  of  taxation,  are  a  potent  source  of 
municipal  corruption.  A  very  intelligent  employee  of  a  certain 
gas  company  informed  him  that  all  the  employees  in  that  com- 
pany had  to  be  recommended  to  their  places  by  the  political 
boss  of  their  precinct,  and  had  to  keep  up  their  membership  in 
the  political  organization  in  order  to  retain  their  positions. 
When  the  Philadelphia  Gas  Works  were  still  under  public 
management,  they  were  buying  40  per  cent  of  their  gas  from  a 
private  company,  and  they  always  took  their  employees  at  the 
recommendation  of  the  Philadelphia  alderman,  and  did  not  keep 
them  longer  than  they  could  help.  Their  motto  was :  "The  more 
different  people  we  can  hire  in  a  given  month  the  more  aldermen 
we  can  please  the  more  times."  It  would  be  easier  to  convince 
the  people  of  the  need  of  civil-service  reform  and  business 
efficiency  than  it  would  to  get  rid  of  the  demoralization  con- 
nected with  this  relation  of  private  companies  to  legislative  and 
administrative  bodies. 

Civil  Service  in  Municipal  Affairs. 

Mr.  Foote  advocates  a  rigid  civil-service  reform  in  municipal 
affairs  in  case  municipalities  should  take  over  to  themselves  the 
operation  of  their  public  utilities.  He  believes  that  the  em- 
ployees engaged  in  the  operation  of  utilities  should  be  retained 
for  life,  during  good  behavior.  The  witness  declares  that  he  is 
somewhat  different  from  the  average  civil-service  reformer  in 
that  he  does  not  believe  that  it  is  of  any  interest  to  the  public 
how  a  man  gets  his  position,  but  it  does  interest  the  public  what 
he  does  after  he  gets  it.  Therefore  primary  appointments  should 
be  made  in  any  way  that  would  seem  best — not  necessarily  by  ex- 
aminations— but  there  should  be  a  probationary  period  of  six 
months  before  the  employee  goes  upon  the  regular  roll.  Pro- 
motions should  be  made  from  the  lower  to  the  higher  grades 
from  those  in  the  service,  and  not  from  the  outside,  thus  creating 
a  stimulus  for  efficient  work. 


MUNICIPAL    OWNERSHIP  9 

The  Relation  of  Municipal  Ozi'nership  to  Labor  Conditions. 

Professor  Bemis  says  that  the  tendency  of  public  employ- 
ment is  to  improve  labor  conditions.  The  hours  of  labor  are 
usually  reduced.  The  municipalities  in  England  attempt  to  pay 
the  standard  trade-union  rate  of  wages.  Tramways  when 
operated  by  private  companies  had  refused  to  recognize  unions 
and  had  worked  their  men  very  long  hours ;  but  as  soon  as 
the  municipalities  took  hold  of  the  plants,  union  wages  and 
hours,   etc.,   were   introduced. 

%    Des  Moines  Register  and  Leader.  August  26,  1908. 

What  the  Public  Does  Not  See.     Henry  L.   Doherty. 

Throughout  this  state  there  are  a  great  many  small  cities ; 
the  growth  of  these  cities  depends  primarily  on  their  ability 
to  have  conveniences  and  comforts  that  are  not  enjoyed  in 
country  life.  The  only  reason  that  a  city  lot  representing  one- 
seventh  of  an  acre  may  be  worth  $50,000,  while  the  same  kind 
of  dirt  some  place  else  is  worth  $100  for  a  full  acre,  or  $14 
for  the  area  of  the  lot,  is  the  opportunities  that  it  presents 
and  the  opportunities  primarily  due  to  the  quasi-public  and 
municipal  service  of  that  particular  community — sewerage,  water, 
gas,  electric  light  and  matters  of  that  sort.  Nothing  so  con- 
tributes to  the  growth,  prosperity  and  enhancement  of  wealth 
of  those  cities  as  the  liberal  conduct  of  the  quasi-public  utilities 
or  the  advantages  such  as  sewerage,  furnished  by  the  munici- 
palities. Failure  to  furnish  those  various  advantages  means 
that  the  city  cannot  grow ;  and  these  quasi-public  corporations 
can  be  a  great  factor  in  the  growth  and  prosperity  of  these 
communities ;  they  can  either  retard  or  accelerate  their  growth 
by  anticipating  the  needs  of  the  communit}'  or  failing  to  do  so. 


Springfield   Republican.   April   10,   1907. 

•    Public    Service    Enterprises. 
Ambassador  James   Bryce   spoke  before  an  audience  of  Chi- 


10  SELECTED    ARTICLES 

cago   business   men   on    the   policy   to   be   pursued   by   a   city   in 

relation  to  public   service   enterprises   as   follows : — 

"It  is  a  pre-condition  to  the  giving  to  a  municipal  authority  of 
any  control  over  public  work  and  public  utilities  that  are  not  neces- 
sarily involved  in  the  varying  existence  of  that  municipal  author- 
ity, that  the  authority  itself  should  be  honest  and  capable — that  Is 
to  say  that  the  administrators  should  be  upright  and  intelligent 
men.  Whether  they  are  will  depend  on  the  conditions  of  the 
particular  city.  It  will  depend  mainly  on  the  public  spirit  of  the 
citizens  and  the  sense  of  civic  duty  which  animates  them.  If 
there  is  a  lively  sense  of  public  duty  and  of  the  responsibility  of 
the  individual  citizen  for  the  good  government  of  the  community, 
if  he  givrs  an  honest  vote  based  on  his  judgment  of  the  char- 
acter of  the  candidates;  if  he  watches  the  conduct  of  those  who 
administer  on  its  behalf  and  calls  them  to  strict  account  for 
any  misdoings,  it  will  obviously  be  safe  to  intrust  to  the  munic- 
ipality functions  which  otherwise  it  might  be  desirable  to  with- 
hold." 

That  all  this  is  an  indispensable  condition  of  success  in 
municipal  enterprises,  no  one  will  dispute;  and  it  is  equally 
to  be  admitted  that  few,  very  few,  American  cities  can  meet 
this  pre-condition  of  a  successful  public  ownership  policy. 

But  there  is  one  point  to  be  noted  in  this  connection 
which  Mr.  Bryce  did  not  touch  upon  and  which  is  very  important 
in  any  consideration  of  the  subject.  It  is  this — that  the  existing 
close  limitations  upon  the  functions  of  municipal  government  in 
America  are  well  calculated  to  injure  that  public  spirit  of  the 
citizen  and  impare  his  active  sense  of  civic  duty  which  are  so 
essential  to  good  government  in  any  case ;  while  it  may  most 
plausibly  be  asserted  that  an  extension  of  these  functions  to 
the  city  ownership  and  operation  of  such  public  services  as 
have  been  mentioned  would  tend  to  cultivate  strongly  that 
spirit  of  individual  watchfulness  over  and  concern  in  the  con- 
duct of  the  government  which  are  now  so  lamentably  lacking 
in  American  cities. 


National  Civic  Federation.  Report  on  Municipal  and  Private 

Operation  of  Public  Utilities.  Vol.  I,  p.  441. 

Messrs.  Edgar  and  Clark  in  closing  their  review  summarize 
their  opinions  as  follows: — "Our  investigation  has  determined 
with  certainty  many  heretofore  mooted  questions.  We  believe 
no  intelligent  reader  of  this  Commission's  work  will  fail  to  con- 


MUNICIPAL   OWNERSHIP  ii 

elude  that  it  clearly  proves  municipal  ownershp  to  be  productive 
of  many  and  serious  ills,  with  little  or  no  compensating  good. 
The  writers  of  these  chapters  agreeing,  we  believe  with  the 
other  members  of  the  Committee  of  Twenty-one,  that  public 
service  companies  should  reasonably  be  regulated  and  afforded 
the  protection  that  comes  with  regulation,  and  appreciating  that 
the  Committee  was  not  appointed  or  constituted  to  consider 
methods  of  regulation,  nevertheless  desire  to  record  their  opinion 
that  some  form  of  regulation  of  private  companies  be  adopted  in 
each  of  the  United  States.  What  that  form  should  be  this  Commis- 
sion is  not  prepared,  by  any  investigation  or  study  it  has  made,  to 
suggest.  As  it  has  always  been  the  function  and  duty  of  govern- 
ment to  insure  that  individuals  shall  deal  justly  with  their  fellows, 
it  is  now  the  function  and  duty  of  government  to  protect  the 
governed  against  injustice  on  the  part  of  these  associations  of 
individuals  working  under  the  name  of  public  service  corpora- 
tions. Any  government  that  is  too  feeble  or  corrupt  to  control 
with  justice  the  conduct  of  a  public  service  corporation  has  little 
prospect  of  being  able  to  itself  supply  such  public  service  with 
efficiency  and  justice.  Our  duty  is  to  elect  to  office  men  of  in- 
telligence and  integrity  to  govern  efficiently,  honestly  and  justly: 
men  who  can  and  will  curb  the  unjust  aggressiveness  of  the 
individual,  or  of  the  voluntary  association  of  individuals,  and 
who  can  and  will  compel  each  to  bear  its  share  of  the  burdens 
of  government,  and  give  in  price,  service  or  otherwise  a  proper 
consideration  for  special  privileges  enjoyed." 

American  Journal  of  Sociology.  12:  241-53.  September,  1906. 

Municipal    Ownership    and    Operation ;    the    Value    of    Foreign 

Experience.    Leo  S.  Rovve. 

A  final  financial  lesson,  of  a  negative  rather  than  of  a  positive 
character,  relates  to  the  policy  to  be  adopted  in  fixing  the  cost 
of  service  to  the  consumer.  It  has  been  pointed  out  time 
and  again  that  the  industries  usually  referred  to  as  public-service 
industries  occupy  an  exceptional  position  because  of  the  special 
franchises    or   privileges    necessary    for    their   operation.      While 


12  SELECTED    ARTICLES 

this  is  true,  a  far  more  important  fact  is  often  lost  sight 
of — namely,  that  these  industries  are  capable  of  subserving 
certain  broad  social  purposes,  and  that  it  is  within  the  power 
of  the  municipality  so  to  adjust  the  cost  of  service  that  these 
larger  social  ends  will  be  attained.  It  is  one  of  the  common- 
places of  social  economy  that  the  transportation  service  is  the  best 
means  of  relieving  congestion  of  population,  and  that  the  gas  sup- 
ply can  be  made  one  of  the  most  effective  means  of  influencing 
the  habits  and  customs  of  the  people.  In  the  transportation 
service  the  plan  adopted  in  most  of  the  large  European  munici- 
palities has  been  to  adjust  the  fares  under  a  zone  tariff,  thus 
increasing  the  cost  of  service  with  the  increase  in  the  length  of 
ride.  Although  this  has  given  satisfactory  financial  results,  it 
has  prevented  the  municipalities  from  performing  their  greatest 
service  to  the  social  well-being  of  the  community,  namely, 
to  induce  the  population  to  move  into  outlying  and  less-con- 
gested sections  of  the  city.  It  is  true  that  the  uniform  fare  of 
our  American  cities  is  unnecessarily  high,  and  is  no  doubt  a 
considerable  tax  on  the  short-distance  passenger,  but  it  is  a  tax 
which  ultimately  redounds  to  the  social  welfare  of  the  community 
in  contributing  to  that  more  equal  distribution  of  population  so 
necessary  to  the  social  advance  of  the  community.  In  this  mat- 
ter of  the  adjustment  of  transportation  rates  to  the  attainment 
of  social  ends,  German  municipalities  are  considerably  in  advance 
of  the  English,  but  they  have  all  much  to  learn  from  the  condi- 
tions prevailing  in  our  American  cities. 

As  regards  the  gas  supply,  it  is  evident  that  a  reduction  in 
the  price  of  gas  so  as  to  permit  the  substitution  of  the  gas-stove 
for  the  coal-stove  is  certain  to  have  a  far-reaching  influence 
on  the  diet  of  the  poorer  classes.  In  this  respect  the  British 
municipalities  have  done  splendid  service.  The  readiness  with 
which  food  is  heated  on  the  gas-range,  as  compared  with 
the  effort  to  start  a  coal-tire  makes  it  possible  to  introduce  a  far 
larger  proportion  of, warm  cooked  food  into  the  workingman's 
diet.  The  little  that  has  been  done  in  this  direction  is  sufficient 
to  show  the  tremendous  power  of  the  city  in  furthering  social 
w-elfare. 

These   are   but   a   few    of   the   many   instances   in   which   the 


^lUXICIPAL   OWNERSHIP  13 

municipality,  in  the  management  of  its  public-service  industries, 
is  able  profoundly  to  influence  the  industrial  efficiency,  the  social 
welfare,  and  the  general  well-being  of  the  community.  European 
municipalities  have  all  begun  to  appreciate  the  power  which  they 
can  wield  in  this  way.  Although  the  sum-total  of  actual  achieve- 
ment is  somewhat  meager,  the  general  principle  involved  is  one 
of  the  greatest  moment ;  the  full  import  of  which  we  have 
but  begun  to  appreciate  in  the  United  States. 

Whatever  lessons  may  be  drawn  from  foreign  experience — 
and  they  are  numerous  and  important — no  one  will  contend  that 
this  experience  can  do  more  than  throw  an  interesting  sidelight 
on  the  problems  that  confront  our  American  cities.  The  final 
choice  between  private  and  public  ownership  and  operation  must 
be  made  on  the  basis  of  our  own  peculiar  conditions.  In  this 
choice,  factors  which  are  entirely  absent  in  European  countries 
will  play  an  important  part.  We  must  recognize,  in  the  first 
place,  that  the  attitude  of  the  American  people  toward  the  city 
is  totally  different  from  that  which  prevails  in  the  countries  of 
Europe.  With  us  city  government  is  a  negative  rather  than  a 
positive  factor.  We  look  to  it  for  the  protection  of  life  and 
property,  but  it  is  with  considerable  reluctance  that  we  accept  any 
extension  of  function  beyond  this  limited  field.  In  Europe,  on 
the  other  hand,  the  city  is  a  far  more  positive  factor  in  the  life 
and  thought  of  the  people.  As  new  needs  arise,  the  inhabitant 
of  the  European  city  looks  to  the  community  in  its  organized 
capacity  for  the  performance  of  each  service.  With  us  in  the 
United  States  the  presumption  is  against  any  extension  of 
municipal  functions,  and  it  requires  considerable  pressure  to 
induce  the  population  to  accept  an  increase  in  municipal  powers. 

Engineering   Magazine.   31:   741-3.  August,   igo6. 

^Municipal    Ownership    of    Engineering   Utilities. 

Everett  W.  Burdett. 

In  view  of  the  present  spirit  of  unrest  and  discontent  regard- 
ing the  operation  of  public  utilities  in  the  United  States,  leading 
to  the  agitation  for  municipal  ownership  of  enterprises  hitherto 


14  SELECTED    ARTICLES 

mostly  conducted  by  associations  of  private  capital,  the  thoughtful 
address  delivered  before  the  National  Electric  Light  Association 
by  Mr.  Everett  W.  Burdett  demands  attention. 

Mr.  Burdett  admits  that  there  has  been  good  reason  for 
adverse  criticism,  and  refers  to  the  manner  in  which,  in  certain 
instances,  there  has  been  just  objection  to  the  manner  in  which 
corporate  organizations  have  abused  the  confidence  which  has 
been  placed  in  them.  This,  however,  is  but  one  side  of  the 
question,  and  the  other  side  should  be  given  fair  consideration, 
before  the  advisability  of  transferring  the  control  of  public 
utilities  to  municipal  control  should  be  conceded. 

"Forgetting  the  beneficent  results  which  have  been  obtained 
only  through  the  accumulation  of  great  wealth  derived  from 
corporate  organizations,  the  dissatisfied  citizen  sees  only  the 
abuses  of  financial  and  corporate  power  of  which  he  has 
been,  or  imagines  himself  to  be,  the  victim.  The  very  word 
'corporation'  has  come  to  have  an  opprobrium  of  its  own. 

"And  yet,  of  course,  this  wholesale  distrust  and  condemna- 
tion of  wealth  and  corporate  power  is  unreasonable.  It  loses 
sight  of  the  fact  that  we  are  unable  to  assert  from  what  other 
source  the  people  at  large  would  have  derived  the  blessings 
which  have  come  from  the  establishment  and  maintenance  of 
the  almost  countless  hospitals,  libraries,  colleges,  parks,  museums 
and  special  funds  for  the  encouragement  of  learning,  the  pro- 
motion of  science,  the  reward  of  courage  and  endeavor,  and 
the  various  other  beneficent  uses  for  which  they  have  been  estab- 
lished and  maintained  by  private  wealth,  largely  derived  from 
corporatioins.  They  forget  that  it  has  been  only  by  the  uniting 
of  the  funds  of  the  rich  and  the  savings  of  the  poor  in  corporate 
organizations  that  the  country  has  been  developed  by  the  estab- 
lishment and  exploitation  of  numberless  forms  of  industrial 
enterprises,  which  have  given  employment  to  labor,  activity  and 
volume  to  trade,  and  a  market  for  all  the  products  of  our  soil  and 
all  the  talents  of  our  people. 

"In  electrical  enterprises  the  central  station  electric  lighting 
investment  in  the  United  States  alone  already  aggregates  700 
million  dollars,  involving  an  annual  operating  expense  of  nearly 


MUNICIPAL   OWNERSHIP  15 

or  quite  100  millions,  distributed  among  all  classes  of  workmen 
and  through  every  artery  of  trade.  The  census  reports  show 
that  in  the  single  year  1904  there  was  an  output  of  new  electrical 
apparatus  of  the  value  of  more  than  150  millions.  There  are 
nearly  5,000  central  electric  lighting  stations.  There  are  23,000 
miles  of  electric  railway,  carrying  each  year  over  5,000  million 
passengers.  A  network  of  nearly  300,000  miles  of  steam  railroad 
gridirons  the  country,  transporting  upward  of  750  million  pas- 
sengers annually.  Spoken  words  are  transmitted  through  more 
than  five  million  miles  of  wire,  by  the  use  of  more  than  three 
million  telephones,  by  which  more  than  5,000  million  messages 
are  transmitted  yearly. 

"All  these  wonders  we  owe  to  corporations.  They  have  given 
free  play  to  tWe  enterprise  and  individual  energy  of  our  people, 
and  have  made  that  enterprise  and  energy  vastly  more  powerful 
and  effective  than  it  otherwise  could  possibly  have  been.  They 
have  enabled  the  man  of  small  means  to  do  a  part  of  the  world's 
work  by  joining  his  savings  with  the  capital  of  his  wealthier 
neighbor.  They  have  encouraged  thrift  and  the  spirit  of  invest- 
ment. They  have  advanced  civilization  and  brought  to  every 
man's  door  the  diversified  products  of  our  own  and  other  coun- 
tries." 

Mr.  Burdett  calls  attention  to  the  fact  that  the  principal 
beneficiaries  of  the  development  of  corporate  organizations 
have  been,  not  the  organizers,  managers,  and  stockholders  of 
these  enterprises,  but  the  general  public,  and  that  the  community 
at  large  has  obtained  vastly  greater  benefits  from  corporate  enter- 
prise than  have  those  whose  money  has  made  them  possible.  A 
comparison  of  dividends  paid  with  services  rendered  shows  the 
truth  of  this  statement,  and  demonstrates  that  the  tax-gatherer, 
the  employe,  and  the  general  public  have  each  and  all  reaped 
rewards  vastly  greater  than  have  been  realized  by  the  stockholders 
in  the  enterprises.  The  existing  widespread  agitation  for  the 
municipal  ownership  and  operation  of  public  utilities  may 
really  be  attributed  to  the  influence  upon  the  popular  mind  of 
the  widespread  dissatisfaction  and  resentment  occasioned  by  the 
abuses  of  great  wealth  and  corporate  facilities.  To  this  must 
be   added   the   skilful   use   of   this    dissatisfaction   by   politicians,. 


i6  SELECTED    ARTICLES 

seeking  to  turn  public  opinion  to  the  advancement  of  their  own 
ends. 

'Tn  pointing  out  the  fallacy  of  adopting  municipal  ownership 
in  the  United  States  on  the  strength  of  its  alleged  successes 
abroad,  the  first  thing  which  is  to  be  suggested  is  the  danger 
which  always  Hes  in  the  offhand  adoption  of  foreign  methods, 
laws  or  practices  in  another  country.  It  can  seldom  be  done  suc- 
cessfully. Differences  in  political,  economic  or  social  conditions 
almost  always  exist  which  render  the  transplanting  of  the  cus- 
toms  or  methods   of   one  country  into  another  inexpedient. 

"As  contrasted  with  American  municipal  service,  that  abroad 
is  less  political  and  more  business-like  in  its  character,  more 
certain  in  its  tenure,  more  continuous  in  its  service  and  more 
disinterested  in  its  activities.  Its  desirable  features  are  not  only 
secured  and  protected  by  law,  but  are  demanded  by  public  senti- 
ment. While  the  raw  material  is  perhaps  as  good  or  better  in 
the  United  States  than  in  the  European  cities,  it  is  handicapped 
in  its  efficiency  by  its  political  character  and  the  uncertainty 
of  its  tenure.  The  American  municipal  servant  never  knows 
how  long  he  is  to  be  permitted  to  hold  his  place  and  is  subject 
to  constant  changes  in  policy  and  supervision.  The  only  thing 
he  can  be  reasonably  sure  of  is  that  his  head  will  ultimately 
drop  into  the  basket.  This  system,  for  system  it  has  come  to  be, 
may  perhaps  prevent  dry  rot  and  some  of  the  evils  of  bureau- 
cracy, but  it  is  at  the  expense  of  efficient  public  service." 

An  examination  of  the  operation  of  municipal  ownership 
in  Great  Britain  does  not  give  positive  assurance  as  to  the  suc- 
cess or  failure  of  the  system  in  the  United  Kingdom.  In  some 
instances,  in  electric  lighting,  for  example,  a  little  more  than 
one-half  of  the  municipal  undertakings  have  showed  a  profit, 
while  a  much  larger  proportion  of  private  enterprises  have  been 
found  profitable.  It  is  not  by  financial  returns  alone,  however, 
that  a  system  is  to  be  judged.  A  well  managed  system  shows 
its  efficiency  by  the  extent  and  nature  of  its  development,  by  the 
completeness  of  the  public  service  rendered,  and  by  the  real 
additions  to  the  wealth  of  the  community  which  are  effected 
by  its  operation.  Judged  by  this  standard  the  operation  of  such 
utilities    as    electric    lighting,    telephone    service,    electric    power 


MUNICIPAL   OWNERSHIP  17 

distribution,  and  the  like,  by  municipalities,  cannot  compare  in 
efficiency  with  the  work  of  private  corporations.  In  support  of 
this  view  Mr.  Burdett  refers  to  the  action  of  the  Institute  of 
Electrical  Engineers  to  endeavor  to  overcome  the  restrictive 
action  of  local  authorities  upon  the  development  of  the  electrical 
industries  in  Great  Britain. 

"The  remedy  for  existing  conditions  must  come  from  both 
within  and  w^ithout.  The  companies  interested,  the  public  au- 
thorities and  the  public  at  large  must  each  contribute  to  the 
solution  of  the  problem.  None  of  them  can  or  will  be  w'holly 
effective  without  the  others.  Human  nature  is  such  that  it  can 
not  be  trusted  to  regenerate  itself,  public  clamor  is  frequently 
ineffective,  while  enactments  of  the  legislature  can  not  accom- 
plish all  that  is  desired. 

'Tn  the  first  place,  the  companies  engaged  in  furnishing 
public  services  must,  in  their  own  interests,  strive  more  and 
more  to  give  good  service  at  fair  rates.  While  they  can  not 
all  avail  themselves  of  the  advantages  of  the  legal  so-called  slid- 
ing scales,  they  can  hope  for  the  best  results  only  along  the  line 
of  the  theory  of  the  sliding  scale.  In  my  judgment,  the  time 
has  gone  by,  if  it  ever  was,  when  extortionate  rates  and 
wretched  service  will  promote  the  interests  of  the  corpora- 
tions. He  who  serves  the  public  best  serves  his  company 
best.  Patience  and  a  spirit  of  conciliation,  and  a  real  desire 
to  increase  facilities  and  reduce  charges  as  rapidly  as  consist- 
ent with  such  management,  will  ultimately  bring  their  rewards 
in  the  form  of  increased  earnings  and  larger  dividends.  And 
when  the  public,  in  any  given  community,  comes  to  see  that, 
notwithstanding  the  mouthings  of  the  demagogue  and  the 
agitator,  it  is  being  fairly  treated  by  the  corporations,  its  ob- 
jections to  large  and  increasing  returns  upon  invested  capital 
will  gradually  disappear. 

"Next :  the  abuses  of  great  wealth  and  corporate  privileges 
to  which  I  have  alluded  must  cease,  or  at  least  be  greatly 
mitigated.  Self-interest  must  realize  the  fatality  of  a  con- 
tinuance of  the  abuses  involved  in  gross  over-capitalization, 
poor   service,   high-prices,   discrimination   among  consumers   and 


i8  SELECTED    ARTICLES 

above    all    the    attempt    to    control    the    law-making    power    for 
purely   selfish  ends. 

"Third :  Public  sentiment  must  be  cultivated.  The  one  great 
need  in  the  economic  world,  is  popular  education  along  sound 
economic  lines.  Let  us  no  longer  leave  the  exploitations  of 
vital  economic  principles  to  the  visionary  or  the  doctrinaire, 
on  the  one  hand,  or  to  the  irresponsible  politician  or  sel'fisH 
agitator,  on  the  other.  A  real  campaign  of  education  is  what 
is  needed,  a  broad,  comprehensive,  intelligent,  persistent,  ag- 
gressive and  well-directed  campaign,  which  shall  leave  nothing 
in  reason  undone  to  spread  sound  economic  doctrines.  So  far 
as  self-interests  enter  into  it,  let  it  be  an  enlightened  self- 
interest,  having  in  mind  the  rights  of  all;  let  it  be  devoted 
to  the  fundamental  proposition  that  all  members  of  the  com- 
munity are  bound  together  in  such  intimacy  of  relation  that 
no  member  can  ruthlessly  injure  another  without  ultimately 
feeling  the  recoil  upon  himself.  'Live  "and  let  live,'  should 
be  the  motto." 

Outlook.  80:  266-8.  June  3,  1905. 

V  Municipal   Ownership. 

The  problem  on  which  the  American  people  are  thinking 
more  or  less  clearly  and  definitely  is  this :  Where  is  the 
line  to  be  drawn  between  those  industries  which  the  munici- 
pality should  control  and  those  which  should  be  left  to  indi- 
vidual ownership  and  administration?  Without  attempting  to 
answer  that  question,  we  here  suggest  three  principles  by 
which  the  thinker  may  be  guided  in  seeking  a  sane  and  rational 
conclusion : 

L  We  are  not  to  go  back.  Industries  which  are  now 
controlled  with  fair  measure  of  success  by  the  municipality 
ought  not  to  be  abandoned  by  the  municipality  and  turned  over 
to  public  service  corporations.  The  city  of  New  York  has 
built  and  owns  a  water  system,  and  has  carried  it  on  for 
years  with  fairly  satisfactory  results.  No  consideration  should 
induce  it  to  consider  the  proposition  to  turn  over  the  control 
of  its  water  supply  to  private  owners.     This  proposition,  made 


MUNICIPAL   OWNERSHIP  19 

on  behalf  of  thq  notorious  Ramapo  Water  Company,  was  suc- 
cessfully resisted,  but  not  without  a  battle.  New  York  for 
years  owned  and  controlled  its  streets.  In  order  to  secure 
greater  convenience  of  transportation,  a  few  years  ago  it  allowed 
a  private  corporation  to  build  a  second-story  street  and  own 
and  control  it.  It  allowed  another  corporation  to  acquire 
a  quasi  ownership  and  a  practical  control  of  the  center  of 
its  great  avenues.  It  never  ought  to  have  done  this.  It  has 
not  allowed  a  private  corporation  to  own  its  great  subway, 
and  no  impatience  for  immediate  convenience  should  tempt  it 
to  allow  its  future  subways  to  become  private  property.  It 
should  own  and  control  its  highways,  whether  under  the  ground, 
on  the  ground,  or  above  the  ground ;  and  if  it  allows  the 
system  of  transportation  on  these  streets  to  be  administered 
by  private  corporations,  it  should  keep  that  administration  sub- 
ject to  governmental  supervision  and  control: 

11.  There  is  a  very  simple  and  a  very  clear  distinction  be- 
tween those  industries  which  are  carried  on  by  individuals  for 
individuals,  and  in  which,  therefore,  competition  will  probably 
be  maintained,  and  those  industries  which  are  of  necessity 
carried  on  by  one  great  organization  for  the  community  as 
a  whole,  and  in  which,  therefore,  competition  cannot  be  main- 
tained. The  bakers  and  butchers  and  tailors  and  shoemakers 
belong  in  the  first  category;  the  water  supply,  lighting,  and 
transportation  belong  in  the  second.  If  the  baker  furnishes 
me  poor  bread,  I  can  go  to  another  baker ;  but  if  the  gas 
company  furnishes  me  poor  gas,  I  cannot  go  to  another  gas 
company.  If  my  shoes  pinch  my  feet,  I  can  try  another  shoe- 
maker ;  but  if  the  trolley  line  puts  on  so  few  cars  that  I 
have  to  hang  on  to  a  strap  in  my  daily  trip  between  my 
home   and  my  office,   I   cannot  try  another  trolley  line. 

Are  there,  not,  the  reader  may  ask,  a  beef  trust,  and  a 
sugar  trust,  and  something  very  like  a  coal  trust?  Yes.  But 
municipal  ownership  furnishes  no  remedy  for  these  combina- 
tions. That  must  be  sought  in  State  or  Federal  legislation.  If 
the  city  were  to  take  over  all  the  butcher  shops,  it  would 
still  have  to  buy  its  meat  of  the  beef  trust.  Again,  the  reader 
may  ask :    If  the   gas   company  charges  too   much   or   furnishes 


20  SELECTED    ARTICLES 

inferior  gas,  can  we  not  charter  a  competing  company?  if 
the  trolley  line  gives  poor  service,  can  we  not  give  a  franchise 
to  a  rival  line?  The  answer  is,  No!  History  has  demon- 
strated the  truth  of  the  economic  aphorism.  Where  combina- 
tion is  possible,  competition  is  impossible.  The  gas  companies 
combine  under  one  management,  or  divide  the  city  into  dis- 
tricts, and  leave  the  individual  no  option  but  to  take  gas  from 
his  district  company.  The  street  has  already  been  given  to 
one  trolley  line,  and  cannot  be  given  to  another.  And  if  a 
rival  line  is  built  to  parallel  it,  the  two  soon  combine,  if  not 
under  one  management  at  least  in  one  policy. 

Speaking  broadly,  then,  there  are  in  the  city  certain  natural 
monopolies.  Water,  lighting,  transportation,  are  illustrations. 
The  city  is  not  called  upon  to  undertake  all  industries,  nor  all 
that  are  necessary  to  human  well-being.  It  need  not  open 
city  bakeries  and  groceries.  But  it  may  well  take  over  the 
natural  monopolies.  That  is,  it  may  well  undertake  the  ex- 
periment of  doing  for  itself  those  things  which  are  necessary 
to  the  welfare  of  the  city  as  a  whole,  and  in  which,  therefore, 
practically  all  the  citizens  have  a  common  interest,  and  which, 
in  the  nature  of  the  case,  must  be  done  by  one  corporation, 
either  private  or  public. 

III.  There  is  also  a  simple  and  clear  line  of  distinction 
between  ownership  and  administration.  The  city  may  both  own 
the  plant  and  administer  the  industry,  or  it  may  own  the 
plant  and  allow  private  enterprise  to  administer  the  industry 
subject  to  governmental  rules  and  regulations.  If  the  city  ad- 
ministers the  industry,  it  must  employ  a  large  number  of  men 
and  disburse  weekly  large  sums  of  money;  and  in  the  present 
state  of  public  morals  this  involves  some  public  peril.  The 
apprehension  of  this  peril  constitutes  the  most  common  argu- 
ment against  municipal  ownership ;  but  it  is  really  only  an 
argument  against  municipal  administration.  If  the  city  owns 
the  plant  and  permits  private  enterprise  to  administer  the  in- 
dustry, neither  such  employment  nor  such  disbursement  by  the 
city  is  involved.  The  city  of  New  York  owns  the  subway, 
and  this  ownership  enables  it  to  exercise  a  certain  supervision 
and    control    over   the    administration    of    the    subwav.    But    this 


MUNICIPAL    OWNERSHIP  21 

ownership  involves  no  considerable  addition  to  its  pay-roll  and 
gives  no  considerable  increased  political  control  to  the  party 
in  power.  So  it  may  own  the  gas  plant  or  the  telephone  plant 
and  lease  the  right  to  operate  for  a  term  of  years.  Does  the 
reader  satirically  remark,  "Philadelphia !"  We  have  not  for- 
gotten Philadelphia.  But  the  difficulty  in  that  city  is  not  pri- 
marily due  to  the  fact  that  the  city  has  a  gas  plant  to  lease  ; 
it  is  primarily  due  to  the  fact  that  Philadelphia  has  long 
suffered  from  an  unscrupulous  and  corrupt  political  ring  on 
the  one  hand,  and  a  somewhat  self-complacent  and  very  apa- 
thetic content  among  the  citizens  on  the  other ;  until  now  the 
city  is  so  bound  hand  and  foot  that  it  is  difficult  to  untie 
the  knots  with  celerity  and  perilous  to  cut  them  by  a  revolution. 
The  question  of  municipal  administration  of  municipal  in- 
dustries we  reserve  for  future  consideration.  In  our  judgment, 
the  political  peril  involved  in  such  administration  is  less  than 
the  political  perils  in  which  we  are  already  involved  from  having 
public  service  corporations  which,  on  the  one  hand  are  eager  to 
get  special  advantages  from  the  Legislature,  and,  on  the  other 
hand,  are  subjected  to  blackmail  by  corrupt  legislators.  Xh^ 
corruption  in  our  public, schools  and  in  our  Water  and  Fire 
and  Street  Cleaning  Departments  does  not  compare  with  the 
corruption  traceable  to  the  connection  of  public  service  cor- 
porations and  municipal  governments  in  our  lighting  and  our 
trolley  systems.  But  the  two  questions  of  municipal  ownership 
and  municipal  administration  are  distinct  in  fact,  and  should 
be  kept  distinct  in  our  thinking. 

We  submit,  then,  these  three  principles  to  the  consideration 
of  any  of  our  readers  who  are  pondering  the  problem  of  mu- 
nicipal ownership:  i.  Do  not  permit  the  city  to  lose  a  control 
which  it  now  possesses.  2.  In  extending  control,  extend  it 
over  natural  monopolies — that  is,  over  those  industries  which 
serve  the  city  as  a  whole  and  which  experience  proves  must 
necessarily  come  under  a  single  control.  3.  Keep  clearly  in 
mind  the  distinction  between  ownership  and  administration. 
First  let  each  city  secure  municipal  ownership.  Even  if  it  is 
not  ready  also  to  assume  municipal  administration,  it  should 
not   grant   any   long-time   lease ;    for   it    should   not    estop    itself 


22  SELECTED   ARTICLES 

from  considering  the  question  of  municipal  administration  when- 
ever it  finds  private  administration  of  a  public  service,  for  any 
reason,  unsatisfactory. 


Nation.  82:  441-2.  May  3,  1906. 

Municipal   Ownership   Investigators. 

There  is  little  doubt  that  English  experience  will  be  made 
to  support  both  sides  of  the  argument  with  equal  conclusive- 
ness. .  .  .  One  investigator  will  observe  the  London  County 
Council's  steamboats  plying  on  the  Thames,  and  will  say, 
"What  geese  Americans  are  not  to  insist  that  their  cities  own 
every  ferryboat !"  Another  will  look  into  the  complaints  of 
poor  service  by  the  same  boats,  will  scan  the  balance  sheet 
which  shows  that  they  have  been  run  at  a  great  loss,  and 
will  say:  "Heaven  deliver  us  from  such  disastrous  experiments." 
So  of  municipal  tramways  in  Manchester,  city  electric  lighting 
in  Birmingham,  Government-controlled  telephones,  and  so  on. 
Their  bad  and  good  points  will  be  vociferously  and  contra- 
dictorily explained  to  the  American  people,  who  will  be  expected 
to  be  made  thereby  wise  unto  their  political  salvation. 

We  by  no  means  wish  to  disparage  the  investigation.  The 
investigators  at  least  will  learn  something.  And  if  they  offer 
us  divided  counsels,  the  inference  that  the  whole  matter  is  com- 
plicated with  difficulties  will  not  be  without  its  uses.  We  al- 
ready have  a  sort  of  advance  agent  of  investigation  in  the 
person  of  Everett  W.  Burdett  of  Boston,  whose  paper  on  "Mu- 
nicipal Ownership  in  Great  Britain"  is  published  in  the  Journal 
of  Political  Economy  for  May.*  Preliminary  extracts  from  it 
vexed  the  righteous  souls  of  the  municipal-ownership  enthusi- 
asts in  Chicago.  But  they  could  not  suppress  Mr.  Burdett's 
article,  as  they  did  the  famous  Dalrymple  report;  here  it  stands 
in  its  56  pages  of  type. 

Its  most  valuable  part  is  the  statistical  information  which 
Mr.  Burdett  has  amassed.  His  arguments  may  be  combated  and 
his  applications  parried,  but  his   facts  must  be  at  least  chewed 

*See  portions  of  Mr.   Burdett's  article   given  in  this   handbook. 


MUNICIPAL   OWNERSHIP  23 

and  digested.  We  can  all  draw  inferences — even  a  horse  can, 
as  the  farmer  said,  if  he  "gets  a  good  hitch."  But  the  facts 
and  figures  we  are  to  hitch  to  must  first  be  provided;  and 
those  which  Mr.  Burdett  presents  are  very  much  what  was 
needed.  Some  things  they  put  beyond  reasonable  dispute. 
Whatever  else  may  be  said  of  the  policy  of  government  own- 
ership of  electric  lighting,  power,  and  traction,  English  and 
Continental  experience  shows  that  it  has  a  hampering  effect 
upon  the  development  of  the  electrical  industry,  and  that  the 
practical  extensions  in  the  way  of  public  service  are  not 
nearly  so  great  as  in  this  country.  Mr.  Burdett's  summary  is : 
"The  United  States,  with  less  than  double  the  population  of 
Great  Britain,  has  six  times  the  amount  of  apparatus  installed 
for  furnishing  electric  light  and  power,  sixteen  times  as  much 
for  electric  traction,  twenty-three  times  as  many  miles  of 
electric  railway,  twenty-six  times  as  many  motor  cars,  and  five 
and  one-half  times  as  much  money  invested  in  such  enterprises." 
Such  differences  are,  of  course,  to  be  explained  in  part  by 
differences  in  extent  of  area  and  in  the  distribution  of  popula- 
tion and  in  national  customs,  but  the  salient  fact  remains  well 
established.  Governments,  like  monopolies,  are  not  enterprising. 
They  do  not  encourage  invention  because  they  do  not  offer 
the  great  stimulus  of  a  big  money  prize  to  either  inventor  or 
promotor.  On  the  other  hand,  relieved  of  the  pressure  of  com- 
petition, they  are  not  forever  turning,  as  private  investors  and 
corporations  are,  to  plans  for  reducing  the  cost  of  production 
and  improving  while  cheapening  the  public  service.  Hence  the 
result  which  jMr.  Burdett's  studies  set  forth  so  impressively: 
quite  aside  from  the  debate  about  policy  and  cost,  municipal 
ownership  in  Great  Britain  appears  to  be  demonstrably  sluggish 
in  taking  up  with  new  processes  and  in  venturing  upon  en- 
largements of  the  service  looking  far  into  the  future.  A  city- 
owned  trolley-line,  for  example,  would  not  push  out  into  the 
thinly-peopled  suburbs — such  an  extension  would  not  immedi- 
ately pay.  But  a  private  corporation  could  afford  to  wait 
for  returns;  while  its  directors,  by  means  of  real-estate  specu- 
lation along  the  suburban  lines,  would  see  their  way  to  making 
a  great  deal  of  money.  Americans  may  be  bled  by  corporations, 


24  SELECTED    ARTICLES 

but  they  at  least  get  the  service.  Englishmen  may  or  may  not 
have  to  pay  more  for  their  municipally  owned  utilities — the 
actual  cost  is  in  dispute — but  they  confessedly  suffer  from  what 
Mr.  Burdett  calls  "the  inertia  and  lack  of  business  enterprise 
which   are  inseparable   from   municipal   ownership." 

If  the  Government  is  a  fool  and  the  corporation  a  knave, 
what  woods  are  we  to  take  to.  Reform  your  governments,  say 
some,  and  make  them  pure  enough  and  capable  enough  to  under- 
take municipal  operation.  Short  of  that  millennium,  however, 
there  are  those  who  would  be  content  if  our  governments 
could  be  made  pure  enough  and  wise  enough  to  regulate  public- 
utility  corporations.  That  would  not  at  once  open  heaven  to 
us,  but  it  would  make  earth  a  little  more  comfortable ;  and  it 
would  give  the  people  more  for  their  money,  while  at  the 
same  time  stimulating  inventive  genius  and  managing  talent 
by  giving  them  more  for  their  brains. 

Annals  of  the   American  Academy.   29:   275-91.   March,   1907. 

Public    Regulation    of    Street    Railway    Transportation.    Edmond 

R.  Johnson. 

Comparison    of    Municipal    and    Private    Ownership. 

In  the  United  States,  street  railways,  with  the  exception  of 
certain  subways,  are  owned  by  private  companies.  In  Europe, 
although  the  majority  of  the  street  railway  enterprises  are  still 
owned  by  corporations,  the  tendency  is  towards  the  purchase 
and  operation  of  the  tramways  by  city  governments.  The  suc- 
cess that  has  attended  municipal  ownership  and  operation  has 
been  such  as  to  lead  some  persons  to  conclude  that  all  cities, 
both  European  and  American,  might  advantageously  adopt  the 
policy   of  municipalization  of  the   street  railway   service. 

In  Great  Britain  the  street  railway  service  during  the  decade 
following  1890  was  generally  unsatisfactory.  This  was  in  part 
due  to  the  fact  that  the  Tramways  Act  of  1870,  by  which  fran- 
chises were  limited  to  periods  of  twenty-one  years,  foreshadowed 
a  policy  of  municipalization  of  the  private  lines.  When  the 
time    came    for    changing    from    horse    to    electric    traction,    the 


MUNICIPAL   OWNERSHIP  25 

private   companies   generally  neglected   the   service,   with    results 

that  are  well  stated  in  the   following  quotation  taken  from  the 

minutes  of  the  Plymouth,  England,  Town  Council : 

The  main  objects  of  the  corporation  in  purchasing  the  tram- 
ways were  to  get  rid  of  the  company  management,  which  had 
failed  to  give  the  public  an  effective  tramway  service  and  which 
had  exhibited  so  considerable  disregard  of  public  inconvenience 
and  remonstrance,  and  in  the  second  place  the  direction  and 
control  of  the  policy  of  the  tramway  extension  in  the  hands  of 
the*  council  as  representing  the  general  body  of  ratepayers,  for 
the  general  benefit  of  the  borough,  instead  of  leaving  the  tram- 
way system  to  be  developed  and  extended  for  the  purpose  of 
securing  profits  to  shareholders  without  regard  to  local  necessities. 

The  main  advantages  of  municipal  ownership  and  operation 
are : 

(i)  The  possibility  of  low  fares  and  of  adjusting  fares  with 
reference  to  the  most  advantageous  distribution  of  population. 

(2)  The  ability  of  the  city  to  regulate  the  wages  and  hours 
of  labor  of  the  street  railway  employees.  ' 

(3)  To    secure   to   the   city   the   increasing   profits   resulting! 
from  the  growth  of  population  and  traffic. 

Assuming  that  a  municipal  government  is  honest  and  is 
able  to  manage  the  street  railway  service  efficiently,  the  ad- 
vantages of  municipalization  are  manifest.  There  are,  however, 
certain  dangers  connected  with  municipal  ownership  and  opera- 
tion even  under  the  favorable  conditions  prevailing  in  the  cities 
of  Western  Europe : 

1.  There  is  the  liability  that  municipal  debts  may  be  greatly 
increased  and  that  the  cities  may  be  so  desirous  of  reducing 
street  railway  fares  as  to  neglect  to  provide  for  the  payment 
of  the  railway  debt  within  the  proper  period. 

2.  Writers  opposed  to  municipalization  claim  that  the  city  is 
more  liable  than  private  corporations  are  to  allow  the  track 
and  equipment  to  depreciate,  and  to  neglect  the  construction  of 
new  tracks  extending  the  lines  into  unoccupied  suburban  regions. 

3.  It  is  also  claimed  that  the  municipalization  of  street  rail- 
ways will  restrict  the  construction  of  interurban  electric  lines, 
for  the  reason  that  each  city  will  be  disposed  to  confine  its 
lines  to  the  region  within  its  own  limits,  and  that,  having 
done  so,  private  companies  will  not  find  it  profitable  to  con- 
struct lines  connecting  the  cities. 


2(i  SELECTED    ARTICLES 

* 

European  cities  have  so  recently  adopted  the  policy  of  munic- 
ipahzation  of  street  railways  that  it  is  too  early  to  determine 
what  their  policy  will  be  as  to  the  payment  of  the  debts  incurred 
in  buying  out  the  corporations  or  in  constructing  new  lines,  or 
what  their  policy  will  be  regarding  the  maintenance  of  their 
track  and  equipment,  and  whether  they  will  extend  their  systems 
with  adequate  rapidity.  In  general,  it  may  be  said  that  ,the 
British  and  Continental  cities  have  thus  far  dealt  satisfactorily 
with  these  questions.  Whether  municipalization  will  hinder  the 
construction  of  interurban  lines  remains  to  be  seen,  but  it  seems 
pfobable  that  this  may  prove  to  be  a  somewhat  important  con- 
sequence of  municipalization. 

The  success  that  is  attending  the  purchase  and  operation  of 
street  railways  by  foreign  cities  argues  but  little  for  such  a  policy 
for  American  cities.  The  condition  of  municipal  government  in 
the  United  States  is  such  as  to  discourage  the  ownership  and 
operation  of  street  railways  by  public  authorities  at  the  present 
time.  For  the  United  States  the  policy  for  some  time  to  come 
should  be  one  of  public  regulation  rather  than  one  of  public  own- 
ership and  operation. 

The  Street  Railway  Problem  in  the  United  States. 

The  adjustment  of  the  relations  of  the  public  authority  to  the 
street  railway  transportation  service  is  a  problem  comprising  the 
regulation  of  the  provisions  of  the  charter  and  franchise  granted 
to  the  company,  the  regulation  of  the  capitalization  and  financial 
methods  of  the  corporation  performing  the  service,  the  public 
supervision  of  the  service,  the  control  of  the  fares,  and  the  adop- 
tion and  enforcement  of  wise  methods  of  taxation.  This  is  in- 
deed a  complicated  problem,  the  solution  of  which  has  been  as 
yet  but  partly  accomplished.  The  regulation  of  the  franchises, 
services  and  charges  of  street  railways  needs  to  be  more  detailed 
than  is  required  in  the  case  of  steam  railroads,  because  the  street 
railway  service  is  more  completely  monopolistic  than  is  the  busi- 
ness of  railroad  transportation. 

That  these  facts  necessitate  a  detailed  regulation  of  the  street 
railway   service   is   being  increasingly   recognized   in   the   United 


MUNICIPAL   OWNERSHIP  27 

States  as  shown  by  the  general  tendencies  discernible  in  the  legis- 
lation of  the  states : 

1.  There  is  a  tendency  to  limit  the  period  for  which  the  fran- 
chises are  granted,  and  to  increase  the  obligations  to  be  met  by 
the  companies  in  order  for  them  to  maintain  the  validity  of  the 
franchises  they  receive  from  the  public.  The  states  are  giving 
the  cities  power  to  exact  more  than  they  formerly  could  of  the 
street  railway  companies,  and  the  cities  are  showing  an  increasing 
disposition  to  avail  themselves  of  the  powers  they  have  received 

.from  the  states. 

2.  The  state  and  municipal  control  over  fares  is  being  more 
frequently  exercised.  In  several  states  and  in  numerous  cities 
efforts  are  being  made  to  establish  an  effective  public  regulation 
of  street  railway  charges.  These  eft'orts  indicate  more  clearly 
than  any  other  movement  could  the  tendency  towards  a  greater 
exercise  of  public  authority. 

3.  There  is  a  growing  disposition  to  tax  the  franchises  and 
earnings  of  street  railway  companies  as  well  as  their  physical 
property.  The  fact  is  coming  to  be  recognized  that  taxation 
levied  only  on  the  physical  property  of  street  railway  companies 
reaches  but  a  small  part  of  the  value  possessed  by  the  companies, 
and  that  an  adequate  system  of  taxation  necessitates  the  taxa- 
tion either  of  the  franchises  or  of  the  earnings  of  the  companies. 
Moreover,  the  legal  limitations  ordinarily  placed  upon  property 
taxation — that  all  kinds  of  property  shall  be  taxed  equally — pre- 
sents another  reason  for  adopting  some  other  basis  than  physical 
property  for  the  assessment  of  street  railway  companies.  In 
some  states  the  value  of  the  street  railway  franchise  is  reached 
for  purposes  of  taxation  by  treating  the  franchises  as  property 
and  thus  avoiding  the  restrictions  of  the  laws  regarding  taxation 
of  all  physical  property.  The  most  convenient  and,  on  the  whole, 
the  most  practicable  method  of  taxing  street  railway  companies 
is  that  of  requiring  them  to  turn  over  to  the  city  annually  a  liberal 
percentage  of  their  gross  receipts.  While  the  gross  receipts  tax 
is  not  theoretically  the  most  ideal  one,  the  objections  to  it  are 
not  important  in  the  case  of  the  street  railway  business,  and  its 
advantages  outweigh  the  theoretical  objections. 


28  SELECTED    ARTICLES 

The  present  thought  regarding  the  proper  solution  of  the 
street  railway  problem  in  the  United  States  may  be  approxi- 
mately summarized  as  follows: 

(i)  A  five-cent  fare,  with  six  tickets  for  a  quarter,  and  a 
general  system  of  transfers;  (2)  that  the  service  shall  be  per- 
formed by  chartered  companies,  but  that  each  company  shall  pay 
to  the  city  a  percentage  of  its  gross  receipts  and  be  required  to 
pave  and  sprinkle  the  parts  of  the  streets  occupied  by  its  tracks; 
(3)  that  capitalization  of  the  company  shall  be  regulated  by  pub- 
lic authority  and  over-capitalization  prohibited ;  (4)  that  fran- 
chises shall  be  limited  to  twenty  or  thirty  years,  and  that  the  city 
should  retain  the  right  to  purchase  at  the  expiration  of  this  period 
the  property  of  the  company  at  a  fair  valuation;  (5)  that  a  com- 
mission or  some  other  public  authority  shall  pass  upon  the  public 
necessity  for  a  proposed  street  railway,  and  regulate  the  service 
in  the  public  interest;  (6)  that  the  annual  reports  made  to  the 
state  and  city  shall  give  full  information  regarding  both  the 
service  and  finances  of  the  company. 

The  general  problem  of  the  public  regulation  of  street  rail- 
ways has  been  simplified  both  by  the  consolidations  that  have 
brought  the  street  railway  system  in  each  of  the  most  of  our 
large  cities  under  a  single  control,  and  by  the  recognition  on  the 
part  of  the  public  of  the  fact  that  the  street  railway  service  is  a 
monopoly  and  must  be  regulated  as  such.  The  fact  that  the 
street  railway  service  is  a  monopoly  not  only  necessitates  public 
regulation,  but  makes  possible  more  efficient  public  control.  The 
truth  of  this  is  well  illustrated  in  Boston,  where  all  the  lines, 
elevated,  surface  and  subway,  are  operated  by  a  single  company. 
Over-capitalization  has  been  prevented,  the  fares  are  being  regu- 
lated, and  different  parts  of  the  street  railway  systems  are  co- 
ordinated so  as  to  secure  a  good  service  in  a  city  where  the 
difficulties  of  providing  street  railway  transportation  were  ex- 
ceptional. What  Massachusetts  and  Boston  have  done  other 
states  and  cities  can,  and  doubtless  will  do.  Indeed,  hopeful 
progress  is  being  made  in  several  states,  and  the  successful  solu- 
tion of  the  "street  railway  problem"  in  the  United  States  by 
public  regulation  rather  than  by  municipalization  seems  more 
than  probable. 


MUNICIPAL    OWNERSHIP  29 

Outlook.  86:  49-51.   May   11,   1907. 

^Problems  of  Municipal  Ownership.   '' 

We  may  accompany  this  with  another  general  principle.  The 
people,  through  their  government,  whether  national,  State,  or 
municipal,  have  a  right  to  embark  in  any  business  public  in  its 
nature  and  on  which  the  common  welfare  of  the  community  is 
depending,  provided  that  they  can  do  it  better  and  cheaper  for 
themselves  than  they,  can  hire  a  private  corporation  to  do  it. 

On  the  other  hand,  we  think  it  is  equally  evident  from  a  wide 
experience  that  the  water-works  of  a  city  should  never  be  left  in 
private  hands  even  for  temporary  operation.  The  sanitary  con- 
ditions of  the  city  are  too  dependent  upon  pure  water  and  the 
peril  from  false  economies  is  too  great.  In  w^ater  supply,  econ- 
omies are  dangerous  and  extravagance  is  safe.  The  city,  there- 
fore, can  better  afford  to  pay  for  a  water  supply  extravagantly 
administered  by  the  municipality  than  for  a  water  supply 
economically  administered  by  private  enterprise.  In  fact,  ex- 
perience shows  that  whatever  economies  private  enterprise 
effects  rarely  diminish  the  expenditures  of  the  citizens ;  they 
swell  the  profits  of  the  corporation.  What  is  true  of  the  water 
supply  is  true  of  the  school  system.  No  one  would  propose 
that  the  public  school  buildings  should  be  owned  or  the  public 
schools  operated  by  private  enterprise ;  no  one  would  propose 
to  farm  the  children  out  tq_tlTe  lowp'^t  biddpr ;  for  in  public  edu- 
cation as  in  public  Water  supply  the  perils  of  extravagance  are 
immeasurably  less  than  the  perils  from  excessive  economy. 

The  practical  question  respecting  m.unicipal  ownership  relates 
to  public  utilities  which  have  generally  been  carried  on  in  the 
past  by  private  enterprises  and  are  now  being  experimentally  at- 
tempted in  municipalities,  both  at  home  and  abroad,  by  the  gov- 
ernment. These  are  chiefly  the  utilities  of  light  and  transporta- 
tion. Should  the  government  own  and  operate  the  lighting  plants 
and  the  street  railways?  or  should  it  own  them  and  lease  them 
to  private  corporations  for  operation?  or  should  it  own  them  and 
grant  a  permanent  franchise  or  lease,  subject  to  periodical  re- 
vision of  the  rent  or  franchise  tax,  and  exercise  over  them  gov- 
ernment supervision  and  control?  or,  finally,  should  it  leave  them 


30  SELECTED   ARTICLES 

wholly  in  private  hands  and  subject  to  private  control,  and  trust 
to  competition  for  securing  efficient  service  and  reasonable  rates? 
In  our  judgment,  no  economic  thinkers,  except  a  few  paid  ad- 
vocates of  private  enterprises,  any  longer  hold  the  last  of  these 
views.  The  third  of  these  views  is  held  only  as  a  compromise, 
because  permanent  franchises  have  been  granted  in  the  past,  and 
it  is  not  clear  how  the  city  can  recover  the  possession  of  the 
franchises  which  it  has  given  away.  Except  for  complications 
growing  out  of  past  legislation,  the  only  practical  issue  respecting 
municipal  lighting  plants  and  municipal  railways  is  this :  Shall 
they  be  owned  and  operated  by  the  city,  or  owned  by  the  city 
and  leased  to  private  enterprises  on  measurably  short  leases  for 
operation? 

We  here  simply  endeavor  to  state  with  clearness  the  issue, 
without  debating  it;  but  our  general  judgment,  considering  the 
political  and  industrial  conditions  in  this  country,  is  in  favor  of 
municipal  ownership  with  private  operation  on  short  leases. 


Outlook.  82:  504-11.  March  3,  1906. 

Principles  of  Municipal  Ownership.    Robert  Donald. 

I  have  now  reviewed  the  attitude  which  advocates  of  munic- 
ipal ownership  assume  towards  the  least  industrial  and  commer- 
cial of  communal  undertakings.  I  will  now  deal  with  the  more 
industrial,  which  raise  serious  contentions. 

What  are  the  principles  which  should  guide  municipal  action 
with  regard  to  the  larger  and  more  profitable  services,  including 
street  railways,  electricity  and  gas  supplies,  telephones,  etc? 

The  operations  of  these  services  cannot,  on  any  intelligent 
principle,  be  left  to  free  trade.  xA-lmost  every  American  city  has 
started  by  having  several  street  railway  corporations,  and  more 
than  one  electric  or  gas  corporation ;  but  the  irresistible  tendency 
has  been  for  absorptions  and  amalgamation  to  take  place  until  a 
monopoly  has  been  established — a  clear  indication  that  the  serv- 
ices come  within  the  domain  of  natural  monopolies.  When,  how- 
ever, monopoly  is  reached  through  the  stress  of  competition  and 
the    operations    of    graft,    the    undertakings    are    greatly    over- 


MUNICIPAL   OWNERSHIP  31 

weighted  with  capital  and  burdened  and  drained  by  vested  inter- 
ests, progress  is  retarded,  and  cheap  rates  made  impossible.  The 
obvious  conclusion  is  that  public  lighting  services  which  are 
monopolistic  in  character  should  be  kept  in  control  by  the 
municipality.  It  should  not  allow  privileges  which  the  commu- 
nity creates   to   pass   beyond   its   power. 

There  is  little  difference  between  the  principles  involved, 
whether  the  public  service  franchise  is'  for  gas,  electricity,  or 
street  railways.  Compensation  can  be  granted  to  the  city  for  gas 
supplies  on  two  systems :  a  tax  per  cubic  meter  of  gas  sold,  as  in 
Paris  and  German  cities,  in  which  case  the  money  goes  to  the 
municipal  exchequer  and  insures  the  city  getting  a  share  in  the 
profits ;  or  the  enforcement  of  a  sliding  scale,  the  operation  of 
which  enables  the  corporation  to  increase  its  dividend  as  it  low- 
ers its  price — a  system  which  enables  the  consumer  to  benefit. 

The  same  systems  could  be  applied  to  electricity  supply. 
Street  railway  corporations  operating  under  franchise  can  be 
made  to  pay  fees  either  through  a  percentage  of  gross  receipts 
or  in  some  other  way. 

It  is  quite  feasible  and  practical  for  a  city  in  various  ways  to 
grant  public  service  franchises,  but  the  system  has  drawbacks. 
Social  interests  enter  very  largely  into  the  operation  of  all  city 
services.  It  is  in  the  interest  of  the  community  that  light  should 
be  as  cheap  as  possible  to  the  poor,  and  it  helps  the  police  to  have 
the  streets  well  lighted.  Efificient  and  cheap  transportation  has 
an  important  influence  on  health,  and  promotes  well-being.  Cor- 
porations which  exist  solely  for  making  profits  will  not,  as  a  rule, 
risk  a  fall  in  their  dividends  in  order  to  cheapen  a  commodity 
or  popularize  a  service.  The  corporations  have  always  an  eye  on 
the  end  of  the  franchise  period.  They  regulate  their  operations 
accordingly.  They  cease  to  introduce  new  methods,  they  neglect 
adequate  maintenance,  they  allow  their  plant  to  become  dilapi- 
dated ;  and  naturally  so,  as  the  future  is  uncertain,  and  they  want 
recoupment  and  profit. 

From  a  theoretical  point  of  view — assuming  for  the  moment 
that  there  are  no  administrative  dif^culties — let  us  see  how  com- 
plete municipal  ownership  and  operation  would  work.  Take 
street  railways.    The  City  Council  owns  the  railroad  laid  down  in 


32  SELECTED    ARTICLES 

its  own  streets.  It  can  regulate  the  time  of  construction  so  as  to 
be  least  inconvenient  to  the  people.  The  routes  would  be  planned 
also  in  conjunction  with  street  improvements,  clearing  of  slums, 
and  rehousing  the  poor.  A  corporation  holding  a  limited  fran- 
chise has  no  interest  in  the  permanent  development  of  a  suburb. 

The  City  Council  would  always  adopt  the  best  systems  of 
transportation,  as  it  will  live  to  reap  the  benefit.  It  would  have 
some  regard  to  the  appearance  of  its  cars.  It  would  be  a  model 
employer.  Fair  wages  would  be  given  and  reasonable  hours  ob- 
served. Its  car  conductors  would  be  provided  with  neat  uni- 
forms. They  would  be  smart  and  civil.  The  municipality  would 
study  the  needs  of  special  classes.  For  instance,  there  would  be 
cheap  cars  for  workmen,  morning  and  evening.  There  would  be 
special  services  to  artisan  colonies  in  the  suburbs,  to  parks  and 
pleasure  grounds.  The  citizens  would  be  made  to  feel  in  every 
way  that  the  cars  were  their  cars,  and  that  every  cent  they  paid 
would  go  towards  the  improvement  and  development  of  their 
own  co-operative  property.  A  municipal  car  service  can  be  made 
an  excellent  means  for  stimulating  civic  patriotism. 

Then  the  municipal  car  system  would  dovetail  into  the  work 
of  other  departments.  The  cars  would  be  run  at  night  to  collect 
city  garbage,  market  produce,  etc.,  and  the  day  load  of  electricity 
required  for  street  railways  would  be  welcomed  by  the  city 
electricity  department. 

All  these  features  of  a  municipal  street  railway  system,  which 
I  say  are  possible,  exist  in  British  and  Continental  cities.  But 
we  can  imagine  a  publicly  owned  street  railway  service  and  sub- 
ways going  much  further.  The  system  of  transportation  in  a 
city  is  an  essential  element  in  its  life.  The  better  it  is,  the  more 
it  aids  business,  the  more  it  adds  to  social  amenities. 

In  some  British  cities  the  average  fare  is  a  little  over  one  cent. 
It  is  only  a  step  further  to  socialize  the  street  railways  as  we 
have  socialized  the  highways,  bridges,  and  ferries  (for  the  use 
of  which  in  former  years  tolls  were  levied),  and  introduce  free 
transportation — that  is,  free  in  the  sense  that  the  use  of  the 
streets,  maintained  out  of  local  taxation,  is  free,  and  the  use  of 
elevators  in  high  buildings  (paid  for  in  the  rent  of  the  rooms) 
is  free.     I  only  refer  to  the  Utopia  of  free  travel  to  emphasize 


MUNICIPAL   OWNERSHIP  33 

the  difference  between  private  and  municipal  operation  of  street 
railways.  While  it  is  the  aim  of  all  cities  of  which  I  know  to 
make  their  municipal  railways  self-sus-taining  and  profitable, 
there  are  cases  where  a  city  deliberately  incurs  a  money  loss  for 
the  sake  of  a  social  benefit.  Huddersfield,  a  large  manufacturing 
city  in  Yorkshire,  established  tramways  because  companies  re- 
fused to  do  so,  and  ran  them  for  years  at  a  loss,  for  the  general 
benefit  to  the  community.  The  steep  gradients  and  hilly  streets 
which  the  cars  had  to  climb  made  horse  and  steam  traction  both 
unprofitable,  but  the  conformation  of  the  site  made  transporta- 
tion facilities  all  the  more  necessary.  Electric  traction  has  now 
turned  the  city  car  system  into  a  profitable  undertaking.  In 
Cologne,  Diisseldorf,  and  other  cities,  street  railways  are  run 
several  miles  beyond  their  borders  to  municipal  forests  at  such 
low  fares  that  loss  is  incurred. 

The  same  principles  of  social  benefit  arising  from  cheapness 
of  service  should  operate  in  the  case  of  electricity  and  gas  sup- 
plies. Both  services  under  municipal  ownership  can  be  managed 
on  parallel  lines  by  different  committees.  Under  the  Scottish 
municipal  code,  municipalities  are  precluded  from  making  profit. 
The  surplus  is  devoted  to  reducing  charges  and  improving  the 
services.  This  system  is  not  yet  general,  as  municipalities  prefer 
to  manage  their  undertakings  so  as  to  give  a  commercial  instead 
of  or  in  addition  to  a  social  profit.  A  commercial  profit  means 
that  the  surplus  left  after  meeting  all  payments  for  maintenance, 
depreciation,  interest,  redemption  charges,  etc.,  is  handed  over 
to  the  relief  of  local  taxation — thus  benefiting  all  taxpayers. 
When  the  other  system  is  adopted,  the  benefit  in  the  form  of  a 
cheaper  service  is  confined  to  consumers.  The  contrast  between 
the  two  systems  is  most  striking  in  the  case  of  street  railways  in 
London.  In  the  wealthy  and  crowded  financial  center  of  London 
and  in  the  rich  West  End  districts  tramways  are  not  permitted, 
yet  the  rich  taxpayers  in  these  areas  get  a  share  of  relief  which 
comes  from  the  pennies  of  the  poor  who  use  the  tramways  in 
other  quarters  of  the  metropolis. 

Hundreds  of  municipalities  in  Great  Britain  and  in  Conti- 
nental Europe  own  and  manage  efficiently  both  gas  and  electricity 
undertakings.     One  necessary  condition  for  cheapness  of  produc- 


34  SELECTED    ARTICLES 

tion  is  for  the  municipality  to  supply  all  the  city,  and  not  merely 
produce  gas  or  generate  electricity  for  its  own  requirements.  It 
is  economically  wasteful,  for  instance,  for  the  city  of  Chicago  to 
distribute  electricity  all  over  the  city  only  to  light  the  street 
lamps. 

In  Continental  Europe  the  franchise  system  has  existed  both 
as  regards  gas  and  electricity,  although  it  is  now  being  discon- 
tinued. It  did  not  give  low  charges  and  did  not  make  for 
efficiency.  The  sole  object  of  the  concessionary  corporation  is 
to  reap  the  richest  harvest  it  can  during  the  period  of  the  fran- 
chise, without  regard  to  the  future  of  the  undertaking  or  of  the 
city's  needs.  In  Great  Britain  the  franchise  system  was  adopted 
for  electricity  supply.  All  companies  were  limited  by  statute  to 
forty-two  years,  at  the  end  of  which  period  the  municipality  takes 
possession  on  payment  of  "the  then  value"  of  the  plant,  without 
compensation  for  good  will  or  displacement.  This  system  re- 
tarded development  so  that  most  of  the  companies  have  been 
bought  up  long  before  the  franchise  expired,  receiving  some- 
times double  their  capital  expenditure.  And  it  has  paid  the  com- 
munity to  give  this  compensation  in  order  to  develop  the  business 
and  lower  the  charges. 

Municipal  ownership  in  Great  Britain  has  been  more  enter- 
prising than  corporation  rule ;  it  has  always  considered  the  inter- 
ests of  the  whole  community,  and  has  invariably  meant  lower 
charges  for  consumers. 

The  same  principles  of  public  utility  which  apply  to  street 
railways,  gas  or  electricity  supplies  are  applicable  to  telephones 
and  the  distribution  of  hydraulic  power,  or  any  other  service 
which  is  monopolistic  in  character.  Telephones,  while  managed 
successfully  by  municipalities  in  England,  Norway,  Sweden,  and 
Holland,  present  some  difficulties.  Localization  is  not  desirable 
and  isolation  is  impossible.  There  should  be  only  one  telephone 
system  in  order  to  have  the  best  facilities  for  intercommunica- 
tion. The  telephone  service  works  most  smoothly  and  answers 
public  needs  best  in  European  countries  where  it  is  a  State 
monopoly  under  the  post-office.  With  the  telegraph  system  a 
State  monopoly,  as  is  the  case  throughout  Europe,  it  is  an 
anomaly  to  have  the  telephones  under  separate  management. 


MUNICIPAL   OWNERSHIP  35 

The  general  principles  of  municipal  ownership  will  probably 
find  ready  acceptance  as  theories  of  civic  policy,  but  what  about 
their  practical  application?  It  will  be  pointed  out  as  an  initial 
material  difficulty  that  street  raihvay  systems,  gas  and  electricity 
supplies,  cannot  be  limited  by  city  boundaries.  They  should 
serve  many  areas  governed  by  different  authorities.  Provided  all 
these  authorities  are  animated  by  the  same  ideas  of  civic  policy, 
the  difficulties  disappear;  working  arrangements  mutually  bene- 
ficial are  entered  into,  or  joint  services  are  established,  and 
parochialism  gives  place  to  a  wider  civic  patriotism,  which  recog- 
nizes larger  communal  interests.  As  a  matter  of  fact,  the  large 
cities  in  England  serve  their  smaller  neighbors  with  water  and 
gas,  and  are  now  beginning  to  do  so  more  and  more  with  street 
railways  and  electricity. 

The  most  powerful  and  convincing  arguments  urged  against 
municipal  ownership  are  not,  however,  advanced  on  practical  but 
on  moral  and  political  grounds.     Let  the  municipality  extend  its 
activities  and  you  enlarge  the  opportunities  for  patronage.     Add 
to  the  number  of  public  employees  and  you  swell  the  power  of 
the  party  boss.     Give  the  municipality  more  money  to  spend  in 
contracts   and   supplies   and  you   widen   the   doors    for   grafters. 
Municipal   ownership,   in   fact,   means   more   politics,    more   cor- 
ruption, more  dishonesty  in  public  life,  and  more  power  in   all 
elements  which  degrade  a  city  and  demoralize  a  people.     These 
are  the  last  words,   the  final   crushing  arguments,   of  the   anti- 
municipalists.    They  apply  only  if  we  grant  one  large  assumption 
and  make  a  humiliating  confession.     If  we  take  it  for  -granted 
that  the  evil  elements  in  a  community  are  permanent,  that  corrup- 
tion will   forever  triumph,  that  politicians  will  more  and  more 
make  public  plunder  their  business,  that  the  sense  of  citizenship 
and  the  moral  conscience  of  the  Nation  will  continue  to  wither 
and  fade,  then  the  case  against  municipal  ownership  is  complete, 
just  as  it  is  against  every  form  of  good  government. 

If,  on  the  other  hand,  we  have  still  faith  in  the  moral  regen- 
eration of  the  people,  still  believe  that  purity  in  politics  and 
public  life  is  possible,  then  municipal  ownership  is  the  greatest 
and  final  means  of  reform.  It  is  radical;  it  goes  to  the  root  of 
the  matter  and  gets  rid  of  the  mainspring  of  corruption.     Graft- 


36  SELECTED    ARTICLES 

ers,  corrupt  politicians,  and  all  the  other  parasites  who  now  live 
by  plunder  could  not  exist  if  there  were  no  franchises  to  sell,  no 
contracts  to  give  out.  Let  the  cities  keep  their  franchises,  oper- 
ate municipally  their  undertakings,  and  the  chief  source  of  cor- 
ruption and  the  means  of  temptation  will  disappear.  So  long  as 
corporations  and  contractors  are  mixed  up  in  city  administration 
so  long  will  the  tempter  be  there,  and  grit  will  interfere  with 
the  smooth  working  of  the  municipal  machinery. 

But,  it  may  be  urged,  admitting  that  one  evil  is  eradicated, 
others  are  more  strongly  intrenched.  The  patronage  which  falls 
to  the  City  Council  is  increased  and  the  power  of  the  city  em- 
ployee is  greater — both  dangers  from  which  we  now  suffer. 
Having  extinguished  the  tempter,  the  next  step  is  the  moraliza- 
tion  of  the 'city  councilor  and  the  purification  of  the  civil  service 
— neither  impossible  reforms.  The  city  councilor  has  long  since 
been  discovered  in  Germany  and  Great  Britain  who  is  prepared 
to  serve  his  city  without  any  ulterior  motive — ready  to  give  his 
ability  and  his  time  freely  and  honestly  to  the  service  of  the  peo- 
ple. He  is  making  his  influence  felt  in  the  United  States  ;  and 
without  this  public-spirited  servant,  animated  by  a  sense  of 
citizenship.'  who  subordinates  all  selfish  aims,  municipal  owner- 
ship  cannot   succeed. 

Its  success  also  means  that  a  permanent  civil  service  for  cities 
must  be  organized  above  party  and  solely  on  merit,  which  only 
involves  an  extension  of  the  system  which  has  been  introduced 
successfully  in  various  departments  of  the  United  States  Govern- 
ment.  • 

While  this  political  danger  from  the  city's  employees  is  always 
heard  of.  nothing  is  said  of  the  much  more  serious  influence  of 
the  corporation  directors,  lawyers,  and  stockholders.  The  politi- 
cal dangers  feared  from  an  army  of  municipal  employees  have 
never  yet  been  apparent  in  British  cities.  To  begin  with,  the 
workers  benefit  doubly  by  municipal  ownership — they  share  in  its 
general  advantages  and  receive  just  treatment,  for  a  municipality 
must  always  be  a  model  employer.  Then  the  interests  of  the 
city's  employees  are  divergent.  Workers  in  various  departments, 
while  having  the  same  employer,  have  not  common  interests. 
Combination  among  all  is  not  practicable.     In  the  most  developed 


MUNICIPAL    OWNERSHIP  z7 

of  British  cities,  where  every  public  utility  service  has  been 
municipalized,  the  municipal  employees  have  not  proved  a  serious 
factor  at  election  times,  partly  from  the  reason  that  they  are  too 
good  citizens  to  attempt  a  systematic  and  combined  campaign 
which  would  lead  to  reaction,  and  also  partly  from  the  fact  that 
a  large  proportion  of  them  live  outside  the  borders  of  the  munic- 
ipality which  they  serve.  Were  combined  action  ever  attempted 
against  a  common  municipal  employer,  such  a  foolish  proceeding 
would  lead  to  the  drastic  remedy  of  disfranchisement,  just  as  the 
civil  servants  in  Washington  are  deprived  of  their  votes,  al- 
though not  for  the  same  reason.  The  interests  and  well-being 
of  the  whole  body  of  citizens  would  always  preponderate  over 
the  action  of  the  city's  employees,  who  must  always  be  a  com- 
paratively insignificant  minority. 

There  are  those  who  will  admit  the  whole  of  these  premises, 
but  still  only  regard  the  system  as  an  ideal  to  be  reached  in  the 
far  future.  Such  would  argue  that  the  time  is  not  now  opportune ; 
we  must  go  through  a  transition  period ;  we  could  not  get  honest 
officials ;  we  could  not  trust  the  people  yet ;  they  do  not  know 
how  to  use  their  votes.  The  enemies  of  reform  always  fly  to  dis- 
trust of  the  people.  The  same  reasons  were  advanced  for  with- 
holding votes  from  agricultural  laborers  in  England.  They 
would  not,  it  was  said,  know  how  to  use  them.  They  could  not 
be  trusted.  People  will  never  learn  how  to  use  political  privi- 
leges until  they  get  them,  and,  similarly,  people  will  never  know 
how  to  run  municipalies  under  municipal  ownership  until  they  get 
the  opportunity.  There  will  at  first  be  a  period  of  stress,  trial, 
and  turmoil,  when  loyalty  to  the  people's  cause  will  be  strained, 
when  the  old  system  will  strive  hard  for  mastery.  This  experi- 
ence is  gbne  through  before  all  great  reforms  are  finally  estab- 
lished, and  has  been  successfully  weathered  by  loyal  service  and 
steadfast  courage. 

Municipal  ownership,  it  should  be  borne  in  mind,  withdraws 
from  public  life  the  influence  of  the  stockholder,  who,  when  he 
goes  to  the  poll,  has  conflicting  aims  to  consider — his  position  as 
a  citizen  and  his  interest  as  a  stockholder.  When  the  city  keeps 
its  franchise  and  operates  its  undertakings,  it  becomes  an  in- 
dustrial commonwealth,   as   far  as  public   works   are  considered. 


38  SELECTED    ARTICLES 

with  all  the  citizens  as  its  stockholders.  Once  the  barrier  is  past» 
once  the  new  civic  regime  is  inaugurated,  the  citizens  will  not 
be  so  short-sighted  as  to  damage  their  own  property.  Those  of 
them  who  hold  city  stock,  bearing  its  moderate  but  certain  return, 
will  not  like  its  value  depreciated.  They  will  prefer  to  see  their 
city's  credit  stand  well  in  the  market.  All  other  citizens  are  also 
partners  in  the  co-operative  undertakings  which  they  use  them- 
selves or  derive  benefit  from.  As  good  citizens  they  will  do 
nothing  which  is  likely  to  impair  the  efficiency  of  their  co- 
operative enterprises.  Rather  they  will  seek  to  develop  them 
within  their  legitimate  sphere,  and  widen  the  benefits  which  they 
confer  on  the  people. 


AFFIRMATIVE  DISCUSSION 


Arena.  34:  645-6.  December,  1905. 

Fifteen  Reasons  Why  the  People  Should  Own  Their  Own  Public 

Utilities.    Frank  Parsons. 

1.  A  public  plant  does  not  have  to  pay  dividends  on  watered 
stock. 

2.  It  does  not  have  to  pay  dividends  even  on  the  actual  in- 
vestment. 

3.  It  does  not  have  to  retain  lobbyists,  or  provide  for  the 
I  entertainment  of  councilmen  or  legislators  or  subscribe  to  cam- 
paign funds,  or  bear  the  expenses  of  pushing  the  nomination  and 
election  of  men  to  protect  its  interests  or  give  it  new  privileges, 
or  pay  blackmail  to  ward  off  the  raids  of  cunning  legislators  and 
officials,  etc. 

y     4.     It  does  not  have  to  advertise  or  solicit  business. 

5.  It  is  able  to  save  a  great  deal  by  combination  with  other 
departments  of  public  service.     Speaking  of  the  low  cost  of  elec- 

J  trie  light  in  Dunkirk,  the  mayor  of  the  city  says:  "Our  city  owns 
its  water-plant,  and  the  great  saving  comes  from  the  city's  own- 
ing and  operating  both  plants  together." 

6.  Full  public-ownership  (that  is,  public-ownership  free  of 
debt)  has  no  interest  to  pay, 

7.  Even  where  public-ownership  is  incomplete,  the  people 
not  owning  the  plant  free  of  debt,  they  still  have  an  advantage  in 
respect  to  interest,  because  they  can  borrow  at  lower  rates  than 
the  private  companies  have  to  pay. 

8.  As  cities  usually  act  as  their  own  insurers,  public-ownership 
is  free  of  tribute  to  the  profits  and  agency-commissions  of  private 
insurance  companies. 

9.  There  is  often  a  large  saving  in  salaries.  A  public  plant 
pays   its  chief  well,  but  does  not  pay  the  extravagant  salaries 


40  .SELECTED    ARTICLES 

awarded  by  millionaire,  monopolists  to  themselves  or  their  sub- 
stitutes in  office. 

^  10.  Public  plants  frequently  gain  through  the  higher  ef- 
ficiency of  better  treated  and  more  contented  labor. 

11.  The  losses  occasioned  by  costly  strikes  and  lockouts  do 
not  burden  the  ledgers  of  public  works. 

12.  Damages  and  costs  of  litigation  are  likely  to  be  less  with 
public  than  with  private  works.  Accidents  are  fewer  in  a  system 
that  aims  ;it  good  service  and  safety,  and  treats  its  employes  well. 

'-  13.  The  civic  interest  of  the  people  leads  to  other  economies 
through  the  increase  of  patronage  and  the  lessening  of  waste. 
The  larger  the  output,  the  lower  the  cost  of  production  per  unit 
of  service,  other  things  equal,  and  the  tendency  to  waste  elec- 
tricity, water,  etc..  is  much  less  when  the  people  know  that  the 
service  is  a  public  one,  the  profits  of  which  belong  to  them,  than 
when  they  know  that  the  service  is  rendered  by  a  private  cor- 
poration charging  monopoly  rates  and  making  big  profits  for  a 
few  stockholders.  These  economies  are  intensified  as  education 
and  experience  with  public-ownership  develop  the  understanding 
and  the  civic  patriotism  of  the  people. 

14.  The  cost  of  numerous  regulative  commissions  and  in- 
terminable legislative  investigations  into  the  secrets  of  private 
monopolies  would  be  saved  by  the  extension  of  public-ownership. 

15.  Legislation  would  cost  us  less  were  it  not  for  the  private 
monopolies.  For  a  large  part  of  the  time  and  attention  of  our 
legislatures  is  given  to  them. 


Nebraska  State  Journal.   May   12,   1907. 

Municipal  Ownership.     W.  A.  Selleck. 

There  is  a  natural  direction  in  which  municipal  functions  are 
extending.  I  quote  from  Sidney  Webb :  "First,  where  the  con- 
sumption of  a  commodity  is  compulsory,  e.  g.,  water  supply, 
second,  where  no  pecuniary  return  is  received  for  the  supply  of 
any  commodity  or  service  r  e.  g.,  streets,  sewers,  fire  protection ; 
third,  where  the  service  is  furnished  irrespective  of  cost,  e.  g., 
public   schools,   libraries   and  parks ;   fourth,   where  the  good  of 


MUNICIPAL    OWNERSHIP  41 

the  community  demands  .  .  .  that  the  service  rendered  be  as 
great  as  possible,  e.  g.,  food  inspection." 

There  will  be  slight,  if  any,  criticism  on  any  of  the  foregoing 
heads,  as  we  have  been  accustomed  to  consider  them  proper  fields 
for  municipal  activity.  Yet  not  one  of  them  has  been  so  estab- 
lished without  having  passed  over  debatable  ground.  Indeed 
the  first,  waterworks,  may  be  considered  by  many  as  still  on  the 
field  of, debate.  The  second,  streets,  sewers  and  fire  departments 
are  so  regarded  only  because  we  have  accepted  the  fact  that 
these  are  public  uses  which  should  be  furnished  without  charge 
and  at  public  expense.  This  is  a  matter  of  growth  in  knowl- 
edge and  experience.  Who  of  us  cannot  remember  the  toll 
road  or  the  toll  bridge?  It  is  not  two  years  since  we  had  a 
private  sewer  within  the  city  limits  of  Lincoln. 

At  first  thought  it  may  seem  to  some  that  the  schools  have  no 
place  in  this  discussion  for  surely  no  one  thinks  they  should  be 
other  than  public,  controlled  and  financed  by  the  public.  Yet 
why  do  we  so  confidently  assert  this  except  as  we  firmly  believe 
it  to  be  for  the  public  good?  The  owners  of  private  schools, 
those  who  believe  in  the  parochial  school  might  well  say  that  the 
public  by  establishing  free  public  schools  is  encroaching  on  their 
ground,  making  their  property  less  valuable,  and  in  many  in- 
stances could  without  doubt  make  plausible  claim  that  they  were 
doing  as  good  if  not  better  work  in  training  children  than  the 
public  school.  The  fact  that  the  public  school  is  so  firmly  estab- 
lished as  to  be  both  a  national  and  a  state  policy  and  is  no  longer 
left  to  the  whim  of  the  individual  city  does  not  make  the  argu- 
ment essentially  dififerent. 

In  all  of  the  above  mentioned  lines  municipal  ownership  is 
recognized  in  Lincoln,  at  least,  as  beneficial  to  the  public. 

I  come  now  to  more  debatable  ground.  The  last  point  was 
where  it  was  desired  that  the  service  rendered,  or  to  put  it 
differently,  the  consumption  by  the  public  should  be  as  great  as 
possible.  Reversing  that  statement  brings  the  fifth  head,  viz: 
where  it  is  desirable  that  the  public  consumption  should  be  as 
small  as  possible,  e.  g.  the  liquor  traffic.  Sixth,  where  improved 
standards  are  desirable,  regardless  of  their  being  financially  self 
sustaining,  e.  g.,  public  baths,  lodging  houses,  parks,  etc.     Seventh 


42  SELECTED    ARTICLES 

and  lastly,  where  a  monopoly  is  desirable,  e.  g.,  street  railways, 
gas  and  electric  light  companies,  telephone  companies,  ice  plants, 
heating  plants,  garbage  crematories. 

In  this  state  the  public  sentiment  on  the  liquor  question  has 
apparently  divided  rather  on  the  line  of  control  or  prohibition 
than  of  public  ownership.  One  state  only,  so  far  as  I  can  recall, 
having  experimented  along  the  line  of  ownership  rather  than 
control  of  private  ownership. 

We  als--!  recognize  parks  and  libraries  as  being  proper  avenues 
of  public  activity.  In  larger  and  older  cities  baths  and  lodging 
houses  are  so  recognized.  The  need  is  not  pressing  here  yet  and 
until  the  need  is  felt,  public  opinion  can  hardly  be  said  to  exist. 

The  last  list  of  corporations  constitute  the  debatable  ground 
of  the  present  day.  Street  railroads,  gas  and  electric  light  and 
telephone  companies,  ice  plants,  heating  plants  and  garbage 
plants.  I  have  chosen  to  approach  this  group  by  the  somewhat 
tedious  process  of  this  paper  for  the  purpose  of  showing,  if  I 
could,  that  there  is  no  essential  difference  between  this  group 
and  the  others  on  which  we  are  all  practically  agreed. 

For  a  moment,  let  us  compare  and  contrast  them.  Take  the 
street  car  and  the  gas  and  electric  light  and  the  telephone  as  the 
types  of  their  class,  and  the  waterworks,  public  schools  and 
parks  as  the  types  of  their  class.  Waterworks,  schools  and  parks 
are  public  necessities.     So  are  the  others. 

All  the  people  are  benefited  alike  by  the  waterworks,  schools 
and  parks,  and  are  not  by  the  cars,  the  lighting  companies  and  the 
telephone,  but  is  that  true?  On  the  contrary,  is  it  not  more  true 
that  the  burden  of  their  support  falls  on  all  but  the  benefits  are 
enjoyed  by  those  who  happen  to  be  prepared  to  enjoy  them? 

The  taxpayer  who  has  no  children  gets  only  an  indirect  bene- 
fit from  the  public  schools.  The  man  living  at  a  distance  from 
the  park  does  not  get  the  same  benefit  as  the  man  who  happens 
to  have  located  near  it.  The  house  that  is  not  reached  by  the 
water  main  must  still  depend  on  the  cistern  or  the  well  for  drink- 
ing water.  Indeed,  light,  heat  and  means  of  communication 
either  of  transporting  the  body  or  the  voice  is  fully  as  much  a 
necessity  of  city  life  as  is  water  or  schooling  or  library  books. 

Does  anyone  say  a  man  cannot  go 'without  water  and  live? 


MUNICIPAL   OWNERSHIP  43 

I  reply  I  agree,  but  he  is  not  obliged  to  have  water  pumped 
through  mains  as  long  as  the  rains  descend  and  the  springs 
of   earth  do  not  dry  up. 

Compare  them  as  you  will ;  contrast  them  in  any  way  possible 
and  you  will  find  that  the  reasons  which  have  made  desirable 
public  ownership  of  schools,  libraries,  waterworks,  streets  and 
alleys,  parks,  etc.,  are  all  applicable  and  cogent  reasons  for  the 
ownership  of  any  and  all  public  corporations  whose  business  it 
is  to  serve  the  public  at  large  as  a  public  body,  or  whose  business 
is  such  as  requires  a  continuous  and  permanent  use  of  the  public 
streets. 

Outlook.  80:  411-3.  June  17,  1905. 

Municipal    Ownership. 

A  contributor  reports  on  another  page  the  results  of  municipal 
ownership  of  street  railways  in  Glasgow.  We  beUeve  that  his 
statement  of  facts  can  be  absolutely  trusted ;  and  they  seem  to 
demonstrate  that,  given  the  right  conditions,  municipal  ownership 
and  operation  of  street  railways  may  be  made  highly  advantageous 
to  the  citizens.  New  York  and  Chicago  are  not  Glasgow.  The 
question  whether  municipal  ownership  and  administration  can 
be  made  advantageous  to  the  citizens  of  an  American  city  is  not 
conclusively  answered  by  the  fact  that  such  ownership  and  ad- 
ministration have  been  made  successful  in  a  Scotch  city.  It  is  still 
necessary  to  ask,  What  conditions  in  the  American  city  are  nec- 
essary to  make  such  success  probable,  and  can  these  conditions 
be  brought  about?  In  answering  these  questions  we  take  a  con- 
crete case,  that  of  New  York  City,  but  the  general  principles  will 
apply  equally,  though  with  modifications,  to  all  American  cities  of 
considerable  size. 

I.  The  city  must  not  tie  its  hands  by  granting  to  any  corpora- 
tion a  permanent  franchise  to  conduct  any  municipal  industry.  A 
franchise  to  an  inter-State  railroad  to  enter  the  city  is  not  one 
to  conduct  a  municipal  industry ;  but  even  in  such  cases  the  fran- 
chise should  always  be  subject  to  periodical  revaluations.  No 
water,  gas,  telephone,  electric,  dock,  or  transportation  franchise 
should  be  granted  except  for  a  moderate  term  of  years.     Where 


44  SELECTED    ARTICLES 

it  is  possible,  the  city  should  build  and  own  the  plant,  as  it  has 
built  and  owns  the  subways  in  Boston  and  New  York.  If  it  has 
not  the  money,  and  if  constitutional  limitations  deny  it  the  right 
to  use  its  credit,  as  is  the  case  in  New  York,  arrangements  should 
be  made  in  the  contract  with  the  operating  corporation  by  which 
the  property  may  be  purchased  at  a  fair  valuation  by  the  city. 

II.  If  the  city  is  to  carry  on  municipal  industries — as  water, 
lighting,  dock,  telephone,  and  transportation  systems — it  is  indis- 
pensable that  the  city  secure  for  that  purpose  honest  and  capable 
officials.  In  Glasgow  only  rate  and  rent  payers  vote  in  municipal 
elections.  "The  slums,''  says  Mr.  Shaw  in  his  volume  on  "Mu- 
nicipal Government  in  Great  Britain,"  "evade  the  tax-collector 
and  sacrifice  the  franchise."  Moreover,  "the  extraordinarily 
severe  laws  against  bribery,  direct  and  indirect,  apply  to  municipal 
elections ;  and  it  is  next  to  impossible  to  get  a  British  voter  to  the 
polls  who  does  not  contemplate  the  contest  with  some  glimmering 
of  interest  and  intelligence."  Whether  it  would  be  advantageous 
to  attach  a  property  or  tax-paying  qualification  to  the  suffrage  in 
American  cities  it  is  useless  to  discuss ;  because  such  limitation 
of  the  suffrage,  however  desirable,  is  impracticable.  It  is  easy  to 
attach  qualifications  to  the  suffrage  when  it  is  granted,  but  almost 
impossible  to  do  so  afterwards. 

The  result  which  Glasgow  secures  by  a  limited  suffrage, 
American  cities  must  generally  secure  by  another  method.  By 
the  extension  and  enforcement  of  the  Australian  ballot  system, 
and  the  abolition  of  the  provision  allowing  the  illiterate  voter  to 
take  some  one  into  the  polling-booth  with  him.  a  quasi  educational 
qualification  can  be  attached  to  the  ballot.  Quite  as  important 
is  a  political  reconstruction  of  the  city  to  adjust  it  to  modern 
needs.  The  municipal  council  in  most  of  our  cities  is  patterned 
after  the  State  and  National  legislative  bodies.  But  a  municipal 
council  is  not  analogous  to  a  State  or  National  legislature.  It  is 
far  more  analogous  to  the  board  of  directors  of  a  commercial  cor- 
poration. The  recent  act  of  the  New  York  Legislature  in  taking 
from  the  New  York  Board  of  Aldermen,  as  its  municipal  council 
is  called,  the  power  of  granting  franchises  and  conferring  it  upon 
the  Board  of  Estimate  and  Apportionment  is  a  step  in  the  right 
direction.  But  it  is  only  a  step.     What  is   really  wanted  is  the 


MUNICIPAL    OWNERSHIP  45 

abolition  of  the  municipal  council  which  is  elected  by  wards,  and 
the  substitution  therefor  of  a  small  board  of  not  more  than 
fifteen  nor  less  than  nine,  who  shall  be  elected  on  a  general 
ticket,  or  by  boroughs,  and  shall  represent  the  entire  city.  Ex- 
perience has  proved  that  ward  representation  tends  to  ward  poli- 
tics— the  bane  of  our  municipal  system.  It  has  been  proved  that 
it  is  almost  impossible  to  get  threescore  or  more  of  men  who  are 
honest  and  capable,  and  who  will  give  their  time  to  the  details  of 
city  administration.  And  it  has  also  been  proved,  by  the  value 
of  the  services  rendered  by  the  Rapid  Transit  Commission  and  by 
the  Board  of  Estimate  and  Apportionment,  that  it  is  possible 
to  get  a  small  board  of  competent,  honest,  and  public-spirited 
men.  The  work  of  a  city  council  is  administrative,  not  legisla- 
tive ;  and  for  such  work  a  small  body,  not  a  large  one,  is  needed. 

Finally,  the  city  must  not  expect  to  make  money  out  of  its 
industries  ;  it  must  expect  only  to  make  them  self-supporting.  It 
may  be  that  private  corporations  will  pay  into  the  city  treasury 
more  money  in  the  form  of  taxes  than  the  municipally  conducted 
industry  will  pay  in  the  form  of  profits.  "The  dividends  which 
the  city  reaps,"  says  our  correspondent,  "are  in  the  form  of  civic 
betterment,  lower  death  rate,  and  improvement  in  social  condi- 
tions." The  city  will  pay  here,  as  it  has  paid  abroad,  higher 
wages ;  it  will  prescribe  for  its  employees  here,  as  it  has  pre- 
scribed for  them  there,  shorter  hours.  It  will  give  to  the  travel- 
ing public  here,  as  it  has  given  there,  lower  rates.  In  other  words, 
the  profits  which  have  gone  into  the  pockets  of  capitalists  as  a 
payment  for  their  money  and  their  services  will  be  distributed 
partly  among  the  employees  in  better  labor  conditions  and  partly 
among  the  traveling  public  in  better  accommodations  and  lowered 
prices.  No  more  may  be  expected  to  be  paid  into  the  city  treasury 
than  is  necessary  to  accumulate  a  fund  for  large  repairs,  for 
important  extensions,  and  for  unexpected  exigencies. 

There  is  no  good  reason  why  any  American  city  should 
not  have  an  experience  parallel  to  that  of  Glasgow,  provided  it 
will  comply  with  the  necessary  conditions :  provided  it  will  not 
part  with  the  control  of  its  streets  by  granting  indefinite  or  per- 
petual franchises ;  will  frame  its  city  government  for  adminis- 
trative rather  than  for  legislative  purposes ;    will  develop  a  civic 


46  SELECTED    ARTICLES 

pride  and  a  public  spirit  which  will  inspire  men  of  integrity  and 
of  ability  to  serve  the  city ;  will  exclude  all  partisan  spirit  from 
the  administration  of  its  municipal  industries ;  and  will  look  for 
its  profits,  not  to  treasury  balances,  but  to  a  purer  and  better 
municipal  life. 


Reader.  7:  477-84.  April,  1906. 

Municipal    Ownership — What    It    Means.      Edward    F.    Dunne. 

Nature  of  Utilities. 

If  a  person  seeks  to  deal  with  a  grocer,  a  butcher,  a  baker, 
a  doctor,  a  lawyer  or  any  other  similar  purveyor  of  a  needed 
object,  he  may  transact  business  with  some  independence.  He 
is  enabled  to  stand  at  arm's  length,  to  make  a  free  and  voluntary 
contract.  If  the  character  of  the  goods  he  seeks  to  purchase  is 
unsatisfactory,  he  may  go  elsewhere.  If  the  price  his  grocer, 
or  butcher,  or  baker  asks  is  unreasonable,  he  may  go  to  another. 
He  is  not  bound  by  circumstances  to  deal  with  any  one  person  or 
company  in  the  purchase  of  such  necessities  of  life. 

But  if  this  same  person  seeks  to  purchase  gas  or  electric  light, 
or  to  utilize  the  street-cars,  the  steam  cars,  the  telegraph  or  the 
telephone,  he  finds  himself  deprived  of  the  right  of  free  contract. 
He  must  take  such  service  as  is  offered  him  and  he  must  pay  the 
price  demanded.  There  is  no  alternative.  He  finds  himself  face 
to  face  with  a  monopoly,  and  he  must  stand  and  deliver,  or  do 
without.  Individual  protest  against  such  a  monopoly  is  abso- 
lutely unavailing.  He  may  protest  against  the  character  of  the 
street-car  service,  or  against  the  rate  of  fare  charged.  But,  if 
he  wishes  to  ride,  he  must  pay  the  rate  fixed  and  endure  the 
service  given  or  be  thrown  off.  His  gas  may  be  of  deficient 
qualiffT^orthe  price  exorbitant,  but  he  must  meet  the  corpora- 
tion's demands  or  his  meter  is  jerked  out.  His  telephone  service 
may  be  unsatisfactory,  and  he  may  complain  against  high  rates, 
but  he  must  pay  the  price  charged  or  the  wires  will  be  cut  and 
his  telephone  removed. 


MUNICIPAL   OWNERSHIP  47 

Graft  and  Ownership. 

Private  ownership  of  traction  and  other  utilities  has  shown 
that  these  corporations  have  wielded,  at  times,  a  dangerous 
power  in  our  political  life.  Yet  the  cry  has  been  raised  by 
opponents  of  municipal  ownership  that  public  control  of  these 
conveniences  would  lead  to  the  establishment  of  a  "political 
machine''  which  would  prove  a  menace  to  any  municipality  in- 
volved. This  cry  is  wholly  false.  Hundreds  and  hundreds  of 
municipalities,  w^here  the  people  have  claimed  their  own,  testify 
to-day  to  the  falsity  of  this  outcry. 

Municipal  ownership  will  take  the  traction  and  similar  utilities 
out  of  politics.  Private  ownership  keeps  them  in  politics.  Only 
a  few  days  ago  one  member  of  Chicago's  City  Council  made 
the  statement  that  he  had  one  hundred  and  fourteen  of  his  ward 
"constituents"  on  the  pay  roll  of  the  Chicago  City  Railway  Com- 
pany. 

"That's  the  way  I  take  care  of  my  fellows,"  he  said.     "And 
I've  got  a  lot  more  jobs  with  other  corporations." 

And  this  is  but  one  alderman  who  has  secured  jobs  for  his 
followers  and  lieutenants  with  one  traction  corporation.  This 
official,  it  may  be  remarked,  has  voted  persistently  in  the  Coun- 
cil for  the  plans  of  the  traction  corporations.  Does  he  get  the 
"jobs"  as  partial  return?  I  leave  the  reader  to  answer.  There 
are  other  aldermen  who  have  made  boast  to  friends  of  the  number 
of  "constits"  they  have  placed  with  the  traction  corporations. 
Does  this  look  as  if  private  ownership  has  kept  these 
utilities  out  of  politics?  To  this  cry  of  "political  machine"  it 
might  be  pertinent  to  return  the  inquiry  as  to  whether  any 
"political  boss"  in  any  of  our  cities  ever  has  been  found  contend- 
ing for  the  principle  of  public  ownership  of  public  utilities.  On 
the  contrary,  the  "political  boss,"  wherever  he  flourishes,  is 
found  eager  to  continue  public  utilities  in  private  hands.  The  • 
reason  is  plain :  Private  ownership  continues  the  opportunities 
for  graft,  for  the  traffic  in  votes  for  special  privileges  and  fran- 
chises, for  corruption.  Municipal  ownership,  conducted  under 
rigid  civil  service,  as  all  its  true  adherents  demand,  will  remove 
the  "traction  problem"  and  similar  questions   from  politics  and 


48  SELECTED    ARTICLES 

effectively  and  finally  displace  private  corporate  and  individual 
privilege-seekers  from  the  positions  they  have  held  in  corrupting 
the  civic  and  political  body. 

Results   of   Ownership. 

The  success  of  municipal  ownership  in  the  cities  of  Great 
Britain,  of  Switzerland,  of  Italy,  of  Austria-Hungary  and  of 
Australia  has  sounded  the  knell  of  private  ownership  of  public 
utilities  in  the  countries  of  the  eastern  hemisphere.  It  has  pro- 
duced, in  almost  every  case,  these  foremost  results : 

First — Reduced  the  cost  of  the  utility  to  the  public. 

Second — Increased  the  efficiency  of  the  service ;  brought  about 
the  re-equipment  of  lines  and  plants  in  accordance  with  modern 
methods ;  secured  regular  service  with  more  frequent  schedules 
and  less-crowded  cars  ;  reduced  accidents. 

Third — Increased  the  wages  and  bettered  conditions  of  the 
workers  who  operate  these  utilities. 

^r'ourth — Made  strikes  a  thing  of  the  past.    ^^'"^ 

Fifth — Eliminated  public  "graft"  and  corruption. 


Outlook.  70:  726-7.  March  22,  1906.  ^^^ 

Municipal   Ownership   and   Corrupt   Politics.     Henry   C.   Adams. 

The  question  of  the  municipal  ownership  of  street  railways 
is  not  an  isolated  question,  but  a  part  of  a  great  system  of  indus- 
trial evolution  that  is  now  going  on.  Whether  regarded  from  the 
nature  of  the  service  rendered  or  of  the  conditions  under  which 
they  are  operated,  street  railways  must  be  classed  as  public  in- 
dustries ;  and,  this  being  the  case,  the  question  whether  they 
should  be  owned  and  operated  by  the  municipality,  or  controlled 
through  a  commission  appointed  by  the  municipality,  is  the 
only  one  to  be  considered.  My  own  opinion,  arrived  at  with 
some  reluctance  after  many  years  of  hesitation,  is  that  the  policy 
of  public  ownership  and  public  administration  has  more  to  be 
said  in  its  favor,  all  things  taken  into  consideration,  than  the 
programme  of  public  control. 


MUNICIPAL    OWNERSHIP  49 

It  is  often  said  that  municipal  ownership  of  the  street  railways 
would  result  in  the  creation  of  a  political  machine  and  in  the 
corruption  of  city  politics.  This,  without  doubt,  suggests  a  most 
serious  criticism  upon  the  plan.  At  the  same  time,  1  am  inclined 
to  think  there  is  less  likelihood  of  corruption  should  the  street 
railways  be  owned  by  the  city  than  under  existing  conditions. 
The  franchise  of  the  street  railway  in  a  large  city  is  worth  an 
immense  amount  of  money,  and  increases  in  value  at  a  rate  more 
rapid  than  the  increase  in  population.  This  being  the  case,  there 
is  every  motive  presented  for  the  purchase  of  political  influence,  so 
long  as  the  street  railway  remains  in  the  hands  of  private 
corporations.  If,  however,  the  city  itself  owns  the  franchise  and 
operates  the  railways  upon  it,  the  Aldermen  have  nothing  of 
value  to  sell,  and  the  present  form  of  political  corruption  at  least 
would  be  done  away  with. 

There  are  two  thoughts  in  addition  that  I  would  like  to  sug- 
gest. In  the  first  place,  are  we  entirely  clear  as  to  what  we  mean 
when  we  use  the  term  "political  corruption"?  Many  things 
which  in  private  industry  are  regarded  as  all  right  are  character- 
ized as  corrupt  if  done  by  an  official  of  the  State. 

The  truth  is,  the  ideal  of  public  morality  entertained  by  the 
American  people  is  infinitely  purer  and  higher  than  the  ideal  of 
morality  which  controls  in  the  business  world.  We  should  not 
forget  that  municipal  ownership  means  absolute  publicity,  an 
established  system  of  accounting,  and  the  unquestioned  right  on 
the  part  of  citizens  to  investigate  the  manner  in  which  the 
municipality  performs  its  public  duties — a  condition  which  does 
not  and  cannot  exist  so  long  as  street  railways  continue  to  be 
private  property. 

The  second  thought  which  I  wish  to  express  relative  to  this 
phase  of  the  question  is  that  public  responsibility  is  always  fol- 
lowed by  a  development  of  the  sense  of  respectability.  Men  of 
influence  and  brains  are  no  longer  in  this  generation  influenced 
by  the  amount  of  money  that  can  be  made  out  of  a  situation. 
The  political  economy  which  assumes  that  the  struggle  for  money 
is  an  adequate  explanation  of  industrial  conduct  is  sure  to  err  in 
its  conclusions,  because  it  does  not  recognize  all  the  motives  in- 
volved.    The  sense  of  power  and  the  ambition  for  influence  are 


50  SELECTED   ARTICLES 

equally  strong  motives  to  industrial  activity  u'ith  the  desire  for 
money.  This  being  the  case,  the  talents  and  brains  of  the  country 
will  inevitably  be  drawn  into  the  service  of  those  organizations 
which  grant  the  opportunity  of  an  exercise  of  power  and  influence* 

The  conclusion  from  this  premise  is  direct.  If  the  municipal- 
ities wish  to  secure  the  services  of  men  of  talent  and  of  respect- 
ability, they  must  assume  functions  that  call  talent  into  the  field 
and  also  those  that  gratify  the  sense  of  respectability.  History  de- 
clares that  the  rise  of  efficient  local  government  follows  the  as- 
sumption by  the  government  of  social  responsibilities,  and,  as 
exemplified  in  the  United  States,  that  the  decay  of  local  govern- 
ment follows  the  restriction  of  local  functions. 

The  superficial  humorist  may  reply  that  this  argument  in- 
volves an  amendment  of  the  Xew  Testament  to  the  effect  that  he 
who  is  unfaithful  in  little  things  will  surely  be  faithful  in  big 
things,  which,  of  course,  is  not  only  a  misquotation  but  a  misap- 
plication of  the  true  quotation.  If  the  city  desires  the  service 
of  respectability  and  talent,  it  must  grant  to  its  servants  respon- 
sibility and  influence. 

The  dangers  which  attend  the  experiment  in  municipal  owner- 
ship of  street  railways  arise,  as  it  appears  to  me,  from  two 
sources.  In  the  first  place,  it  is  likely  that  the  public  will  demand 
an  immediate  dividend  from  the  new  investment  in  an  abnormal 
reduction  in  fares,  and,  in  the  second  place,  it  is  not  unlikely  that 
the  Common  Council  of  the  city,  in  its  desire  to  justify  the 
purchase,  will  sacrifice  the  interests  of  the  future  to  the  present. 
These  difficulties,  however,  may  be  easily  avoided  by  two  simple 
devices.  In  the  first  place,  the  municipal  railway  accounts  should 
provide  for  a  deterioration  account,  and  charge  up  to  operating 
expenses  each  year  an  ample  sum  to  cover  deterioration.  Pro- 
vided this  is  done,  fares  cannot  be  reduced  too  low — assuming, 
of  course,  that  the  railways  are  not  to  be  operated  for  the  public 
profit.  In  the  second  place,  the  bonds  issued  for  this  purpose 
should  include  a  sinking-fund  provision  capable  of  wiping  out 
the  debt  in  a  reasonable  number  of  years. 

It  seems  to  me  that  the  problem  of  municipal  ownership  of 
street  railways  and  the  government  ownership  of  commercial 
railways  are  independent  problems.     The  great  difficulty  in  gov- 


MUNICIPAL   OWNERSHIP  51 

ernment  ownership  of  commercial  railways  does  not  lie  in  the 
technical  questions  of  construction  and  operation,  but  in  the 
adjustment  of  a  schedule  of  rates  that  shall  be  fair  to  all  sections 
of  the  country.  In  the  question  of  municipal  railways  this  ques- 
tion does  not  find  a  place.  There  are  no  terminal  facilities,  since 
the  freight  carried,  being  passengers,  is  self-loading  and  self- 
unloading;  there  is  no  need  of  an  extended  classification  of 
freight,  since  all  freight  for  the  most  part  is  of  the  same  sort. 
The  question  of  rates  is  one  that  may  be  easily  and  simply 
settled.  jMoreover,  the  interests  involved  in  the  case  of  municipal 
railways  are  restricted  to  a  small  locality,  and  the  result  of  this 
is  that  the  policies  of  administration  may  be  easily  adjusted.  For 
many  other  reasons  also  that  might  be  mentioned,  the  decision  in 
favor  of  municipal  ownership  for  street  railways  does  not  in- 
volve a  similar  decision  for  commercial  railways. 


Independent.  60:  449-52.  February  22,   1906. 

Municipal  Ownership  a  Blessing.    John  Burns. 

The  increase  in  the  "social  sense"  which  the  universal  de- 
mand for  municipal  ownership  symptomizes  is  one  of  the  most 
hopeful  signs  of  the  day  in  America  and  thruout  the  world. 
Cheap,  popular,  publicly  owned  rapid  transit  is  the  best  way  to 
disperse  the  ghettos  of  poverty,  the  slums  of  misery  and  the 
Alsatias  of  vice.  The  basis  of  a  happy  life  is  unattainable  so 
long  as  railroads,  ferries,  traction  and  electric  light  companies 
are  used  as,  under  present  conditions,  they  often  are,  against 
social  advancement.  The  home,  which  is  the  cradle  of  character, 
can  no  more  be  solved  by  the  tenement  dwelling  than  city  archi- 
tecture can  be  improved  by  a  duplication  of  flatiron  buildings. 
Mount  Kisco  is  a  slope,  not  an  elevation,  and  till  municipal  own- 
ership of  street  railways,  with  a  deliberate  social  object  in  view, 
is  attained,  the  workers  of  the  lower  East  Side,  the  West  Side 
and  other  congested  quarters  must  remain  in  that  circumscribed 
pit  of  Tophet  in  which  limited  space,  high  rents  and  restricted 
company    tractions    now    confine    them.      Men    and    money,    like 


.  52  SELECTED    ARTICLES 

manure,  are  no  good  in  heaps.  They  putrefy.  They  are  only 
good  when  scattered  over  fresh  fields  and  pastures  new. 

The  greatest  agency — indeed,  the  only  agency — is  city  trac- 
tions owned  by  the  city,  carrying  the  citizens,  taking  the  town 
to  the  country  in  the  evening,  bringing  the  country  to  the  town 
in   the   morning. 

Municipal  ownership  as  usually  tried  in  Europe,  particularly 
in  Great  Britain,  has  been  a  counter  attraction  to  drink,  a 
healthy  diversion  from  vice,  and  has  shown  the  people  a  more 
excellent  way  of  personal  and  national  life.  The  bread  of 
municipal  ownership  has  been  cast  upon  the  waters,  and  has 
been  returned  to  us,  not  after  many  days,  but  almost  immediately. 
In  industry  it  has  made  against  Sam  Parks  on  the  one  side  and 
Farley  on  the  other.  It  has  infused  the  embittered  car  driver 
and  conductor  with  a  proportionate  dignified  and  civic  sense  of 
duty  to  his  neighbors  who  employ  him.  The  municipal  car  man 
has  reciprocated  his  share  that  municipal  ownership  has  brought 
to  him  by  greater  efficiency,  civility  and  loyalty  to  his  employers, 
the  traveling  public.  The  poor  and  lowly  it  has  helped  by  re- 
ducing distances  and  saving  them  from  physical  fatigue,  which, 
rather  than  endure  by  living  in  the  suburbs,  when  they  had  to 
walk,  they  forfeited  for  the  squalid  banalities  of  slumdum.  I 
know  of  no  section  w^hich  has  lost  by  municipal  ownership  in 
England.  Even  the  dispossessed  and  generously  compensated 
shareholders  have  profited  by  the  great  increment  of  social  happi- 
ness that  public  tractions  has  brought  to  all  those  cities  which 
had   the   courage   to   enter   upon   it. 

The  chief  contribution  that  municipal  ownership  will  make 
in  America  to  State,  Federal  and  civic  development  will  be  the 
extent  to  which  it  kills  boodle,  destroys  graft  and  eliminates 
from  public  life  and  service  the  petty  corruptions  that  mortify 
the  flesh  in  the  body  politic  of  America,  without  the  cleanliness 
and  the  purging  of  municipal  life  that  can  only  come  from  the 
moral  exaltation  that  communal  pride  in  public  property  alone 
brings.  America  will  be  confronted  with  the  greatest  problem 
that  ever  lay  athwart  the  upward  path  of  a  democratic  people. 

Under  municipal  ownership  there  is  no  one"  to  off'er  bribes, 
because  there  is  nothing  to  sell.     The  occupation  of  the  thief  is 


MUNICIPAL   OWNERSHIP  53 

gone,  because  the  receiver  has  disappeared.  Any  doubts  as  to 
the  greater  cheapness  and  efficiency  of  municipal  ownership  are 
disposed  of  by  the  incontestable  fact  that  in  Great  Britain — un- 
der municipal  ownership — roads  are  better,  the  staff  more  loyal, 
because  more  contented,  and  the  amazing  cheapness  of  traction 
is  proved  by  the  fact  that  the  average  fare  of  electric  car  passen- 
gers in  London  is  under  two  cents,  while  over  fifty  millions  of 
people    ride    as    one   cent   passengers. 

The  effect  on  housing  has  been  the  disappearance  in  ten  years 
of  eighty  thousand  one  room  tenements,  a  corresponding  increase 
in  larger  tenements  and  a  diversion  to  common  parks  and  heaths 
of  the  women  and  children,  who  by  traction  alone,  without  injury 
or  loss  to  any  one,  now  secure,  as  an  everyday  right,  what,  thru 
company  ownership  and  dear  fares,  was  an  occasional  and 
fatiguing    privilege. 

The  educational  value  of  municipal  ownership  on  all  classes 
of  a  community  in  Europe  is  most  marked.  It  is  the  seminary 
to  the  statesman,  it  is  the  school  to  the  political  economist,  it  is 
the  college  to  the  reformer,  it  is  the  polytechnic  to  the  labor 
leader.  On  a  smaller,  but  equally  useful,  scale  the  larger  duties 
and  obligations  of  government  are  learned,  and  as  America  fifty 
years  hence  w^ill  possibly  have  two  hundred  millions  of  in- 
habitants, it  is  about  time  that  the  assimilation  of  these  millions, 
the  co-ordination  of  these  masses,  the  directing  leadership  of 
this  host  should  be  provided  with  civic  guides,  municipal  philoso- 
phers and  neighborly  friends,  so  that  the  path  of  the  greatest 
community  of  free  men  should  be  not  only  straight,  but  clean, 
and  till  some  field  of  apprenticeship  for  this  stewardship  for  the 
leaders  of  the  future  is  provided,  America's  future  will  be  not 
the  conscious  ordering,  but  a  sordid  welter  and  an  undignified 
scramble  for  mere  money,  which  is  the  present  creed  of  the  cor- 
rupting boodler.  Municipal  ownership  destroys  this  species  and 
in  so  doing  discourages  and  renders  impossible  the  sad  revela- 
tions that  your  insurance  scandals  have  revealed.  Appetite  grows 
by  what  it  feeds  upon.  The  seed  of  corruption  dropped  by  the 
political  agents  in  elections,  in  defense  of  their  franchise  and  to 
extend  their  power,  becomes  a  seed-plot  from  which  is  reared 
the  upas  tree  of  state  defilement.    President  Roosevelt  realizes  that 


54  SELECTED    ARTICLES 

it  may  reach,  if  it  has  not  already  done  so,  Federal  political  life. 
Why  be  wise  after  the  event?  Prevention  is  better  than  cure, 
and  surely  American  opinion,  after  having  read  the  "Shame  of 
the  Cities,"  might  save  itself  another  book  called  "The  Crime  of 
the  Republic."  Both  can  be  avoided  thru  the  trade  union,  the 
labor  leader,  social  idealists,  city  merchants,  the  governing  alder- 
men, the  men  and  statesmen,  all  uniting  in  a  movement  that  ex- 
perience unanimously  testifies  in  Great  Britain  is  the  greatest 
ameliorative  agency,  as  it  has  been  the  greatest  moral  force  that 
fifty  years  of  brilliant,  continuous  and  glorious  success  has  secured 
the  Anglo-Saxon  people.  America  is  not  cursed  v^ith  that  heritage 
of  snobbery,  feudalism  and  convention  that  Old  World  communi- 
ties have  had  to  contend  against.  Its  immunity  from  these  dis- 
abilities gives  it  greater  power  than  it  ever  dreamed  of,  and  yet 
public  utilities  lie  across  its  continent  a  fallow  field  trodden  only 
by  privileged  monopolies,  and  denied  to  the  citizen  without  toll, 
exaction  and  fraud.  If  democracy  is  to  justify  itself,  as  I  hope 
and  believe  it  will,  it  can  only  do  it  by  the  municipal  ownership 
equipping  the  American  people  with  the  one  thing  they  supremely 
lack  as  compared  with  Europeans,  and  that  is  cleaner,  purer  civic 
life,  without  which  personal  wealth  is  a  mockery,  national  re- 
sources a  misused  gift  and  their  constitution  a  thing  of  paper. 

It  is  said  that  the  municipal  employee  may  become  a  serious 
and  dangerous  influence,  when  the  source  of  his  income  is  owned 
by  the  community  in  which  he  is  a  voter. 

This  fear  seems  to  be  a  stumbling  block  to  a  great  many  well 
meaning  and  sincere  people.  My  answer  to  it  is  this :  The  test 
from  experience  is  all  the  other  way.  As  a  rule,  municipal  em- 
ployees have  been  modest  in  their  claims,  reasonable  in  their 
demands,  and,  as  an  invariable  rule,  municipal  labor  has  been 
singularly  free  from  strikes  and  other  disturbances.  At  the 
worst,  these  must  always  be  in  a  minority.  The  employees  of  a 
municipality  never  have  any  difficulty  in  getting,  without  threats, 
as  a  right,  what  now  is  occasionally  wrested  from  the  private 
companies  by  sacrifice,  pain  and  disturbance  for  the  whole  com- 
munity. In  a  word,  municipal  ownership,  apart  from  being  good 
for  passengers,  best  for  cities,  cheapest  for  the  poor,  is  the  line 
of  least  resistance  for  the  solution  of  industrial  problems,  is  the 


MUNICIPAL   OWNERSHIP  55 

way  that  wisdom  directs  and  necessity  compels.  The  extent  to 
which  municipal  ownership  prevails  in  any  country  is  the  stand- 
ard of  class  co-operation  by  common  means  for  common  ends. 

The  car  barn  vote  introduces  into  politics  the  interested  "pull** 
to  an  extent  that  is  impossible  under  municipal  ownership,  be- 
cause the  usual  political  differences  operate  with  men  under 
municipal  ownership,  and  thus  create  an  electoral  equipoise  which 
is  impossible  so  long  as  men's  employment  depends  upon  votes, 
as  it  too  often  does,  under  company  rule.  The  danger  of  the 
municipal  employee  is  a  bogie  which  is  always  raised  in  America, 
which  we  have  buried  for  all  time  in  the  old  country.  To  their 
credit,  they  rarely,  if  ever,  abuse  the  position  that  municipal 
ownership  gives  them,  and  if  they  were  inclined  to  do  so  against 
the  community,  the  community  in  turn  has  always  a  better,  a 
simpler  and  more  peaceful  remedy  than  now  prevails. 


Independent.  61:   927-30.   October   18,   1906. 

V      Our  Fight  for  Municipal  Ownership.    Edward  F.  Dunne. 

In  recent  years  perhaps  no  subject  has  engrossed  so  much  of 
the  attention  of  the  public  in  the  great  cities  of  this  country,  and 
in  Chicago  particularly,  as  the  question  of  ownership  and  opera- 
tion by  the  public  of  public  utilities.  By  these  I  mean  street  cars, 
gas  works,  electric  light  plants,  telephones,  telegraphs,  railroads 
and  other  enterprises,  the  operation  of  which  requires  the  pos- 
session  and  use  of  public  property. 

No  subject  is  of  more  vital  interest  to  the  inhabitants  of  cities, 
who  are  compelled,  day  by  day  and  year  by  year,  to  make  use  of 
and  pay  for  these  utilities,  whether  they  like  them  or  not. 

A  resident  of  a  city  may  dicker,  bargain  with  and  change  his 
butcher,  his  baker,  his  haberdasher,  his  tailor,  his  lawyer,  his 
doctor,  if  he  is  not  satisfied  with  his  services  or  charges,  but 
when  he  comes  to  pay  his  street-car  fare,  his  electric  light  or 
telephone  bill  there  is  room  for  neither  dicker,  trade  nor  change. 
He  must  stand  up  and  deliver,  no  matter  how  unreasonable  the 
charge  or  unsatisfactory-  the  service. 


56  SELECTED    ARTICLES 

If  he  objects  to  the  street  car  service  or  the  price,  he  is  thrown 
off  the  car.  If  he  demurs  to  the  service  or  price  of  gas  or  electric 
Hght,  it  is  shut  off.  If  he  criticises  his  telephone  bill,  his  'phone 
is  pulled  out.  He  has  learned  by  experience  that  individual  pro- 
test or  objection  is  unavailing. 

The  existence  of  grave  and  scandalous  abuses,  both  in  the 
service  given  and  the  price  charged  for  such  utilities,  and  the 
recognition  by  thousands  of  the  utter  helplessness  of  citizens,  as 
individuals,  to  help  themselves  or  correct  these  evils,  which  have 
become  over-burdensome  and  intolerable,  have  brought  about  in 
many  of  the  great  cities  of  the  world  an  unrest  and  public 
agitation   for  the  correction  of   these  evils. 

In  Chicago  a  citizen  is  charged  from  $40  to  $175  for  the  an- 
nual rent  of  a  telephone,  and  the  service  is  not  over-good  at  that. 
The  same  service  is  given  in  Stockholm,  Sweden,  for  $20  a  year, 
on  the  average ;  in  Christiana,  Norway,  for  $22  a  year,  on  the 
average;  in  Trondhjem,  Norway,  for  $13.50  a  year,  on  the  aver- 
age ;  in  Berne  and  Zurich,  Switzerland,  for  $10  and  unward ;  in 
Berlin  for  $36  per  annum ;  in  Copenhagen  from  %2'/  to  $48,  and 
in    Paris,    France,    for   $78. 

The  same  .disproportion  obtains  in  the  cost  of  the  other  utili- 
ties. In  Chicago  the  shortest  ride  a  man  can  take  on  the  street 
cars  costs  him  five  cents,  and  then  he  rides  a  great  part  of  the  way 
hanging  to  a  strap,  jammed,  jostled  and  jolted  about  in  a  manner 
that  is  irritating  to  his  fellow  passengers  and  indecent  to  the 
gentler  sex.  The  fare  paid  in  other  great  cities  of  the  world, 
outside  the  United  States,  is  about  one-half  that  amount. 

This  state  of  facts  and  figures  in  Chicago  and  elsewhere  is 
causing  the  people  to  endeavor  to  find  the  reason  for  this  condi- 
tion of  affairs,  and  to  find  a  remedy. 

On  the  threshold  of  this  inquiry  the  people  of  Chicago  have 
discovered  that  all  these  public  utilities  furnished  to  the  citizens 
of  the  city  of  Chicago  are  owned  and  operated  by  private  corpora- 
tions, organized  and  conducted  for  private  gain.  On  stepping 
over  the  threshold  into  the  vestibule  of  the  investigation  they 
have  also  found  that  in  all  the  cities  where  public  utilities  were 
furnished  at  a  cheaper  price,  these  public  utilities  were  generally 


MUNICIPAL   OWNERSHIP  57 

being  owned  and  operated  by  the  public — in  other  words,  by  the 
municipality  itself. 

Must  or  must  we  not  conclude  that  the  difference  in  owner- 
ship and  operation  is  the  cause  of  the  wide  discrepancy  in  the 
cost  of  these  absolutely  essential  necessaries  of  life  to  the  resi- 
dents of  cities? 

These  facts  and  their  significance  had  long  engaged  my  atten- 
tion, in  common  with  that  of  other  thoughtful  men  of  Chicago, 
when  my  election  as  Mayor  .in  April  of  last  year  gave  me  oppor- 
tunity to  help  in  the  solution  of  at  least  one  of  these  problems. 
I  refer  to  the  traction  problem,  which  sooner  or  later  must  con- 
front every  growing  city  in  the  land.  Conditions  in  Chicago  were 
especially  bad,  so  much  so  that  my  campaign  was  conducted  on  a 
municipal  ownership  platform,  and  the  people  at  the  polls  de- 
clared emphatically  in  favor  of  the  acquisition  and  ownership  of 
the  traction  systems  of  the  city.  How  far  the  present  adminis- 
tration has  been  able  to  carry  out  the  wishes  of  the  people  in  this 
direction  doubtless  will  be  of  interest  everywhere  to  foes  as  well 
as  advocates  of  the  municipal  ownership  idea. 

At  the  time  of  my  inauguration  a  great  strike  of  teamsters  was 
in  progress.  It  lasted  one  hundred  and  five  days,  and  presented 
sufficient  problems  of  its  own  to  keep  the  administration  en- 
grossed until  July  5th,  1905,  when  I  took  the  first  step  toward 
carrj'ing  out  the  wishes  of  the  people  as  expressed  at  the  polls. 
I  submitted  to  the  council  a  message  offering  two  plans  by  which 
the  city  could  acquire  possession  of  the  traction  systems. 

One  of  the  plans  provided  for  an  ordinance  under  which  not 
to  exceed  $75,000,000  worth  of  "Mueller  certificates"  should  be 
issued,  subject  to  the  approval  of  the  people.  These  certificates 
were  to  be  in  the  nature  of  income  bonds,  payable  out  of  the  re- 
ceipts of  the  traction  system,  and  not  a  general  obligation  of  the 
city.  The  theory  was  that  they  could  be  disposed  of  readily  and 
would  yield  the  money  necessary  for  the  purchase  of  the  street 
railway  properties  or  the  building  of  new  roads.  This  became 
known   as   the  "city  plan." 

The  second  plan,  known  as  the  "contract  plan,"  offered  a  twen- 
ty-year franchise  to  five  or  more  citizens  who  would  agree  to  ac- 
cept a  charter,  issue  the  necessary  bonds  and  construct  a  modern 


58  SELECTED    ARTICLES 

electric  system  covering  the  entire  city.  These  proposed  bonds 
would  bear  a  5  per  cent,  interest  and  be  used  solely  for  the  acquisi- 
tion of  the  street  railway  properties.  The  net  receipts  of  the 
system  were  to  be  turned  into  a  sinking  fund  to  the  credit  of  the 
City  of  Chicago,  to  be  used  ultimately  for  the  purchase  of  the 
system  by  the  city. 

Under  this  plan  the  enterprise  would  be  undertaken  on  a  purely 
patriotic  basis,  for  the  good  of  the  city,  the  company  receiving 
no  benefit  beyond  the  salaries  for  the  board  of  directors  and  the 
interest  on  the  bonds. 

On  the  submission  of  these  plans  to  the  council,  they  were 
promptly  referred  to  the  committee  on  local  transportation,  which 
unfortunately  was  not  in  sympathy  with  the  municipal  owner- 
ship idea.  This  committee  held  up  the  plans  for  several  months, 
and,  notwithstanding  my  repeated  protests,  invited  the  traction 
companies  to  negotiate  with  the  city  for  an  extension  of  their 
franchises.  By  December  5  these  negotiations  had  so  far  pro- 
ceeded that  the  committee  had  agreed  upon  and  recommended 
to  the  city  council  ordinances  which  would  have  extended  the 
franchises   and  postponed   municipal   ownership   many  years. 

During  this  period  litigation  was  pending  in  the  Circuit  Court 
of  the  United  States,  involving  the  validity  of  the  companies' 
claims  that  their  franchises,  under  the  so-called  99-year  act, 
would  not  expire  until  1958.  This  claim  was  viewed  with  alarm 
by  all  parties,  as  giving  the  traction  companies  practically  in- 
definite rights  in  the  streets  of  Chicago,  and  formed  the  basis 
of  most  of  the  arguments  in  favor  of  granting  some  franchises 
by  ordinance  to  the  traction  companies  then  and  now  in  posses- 
sion of  our  streets. 

It  was  apparent  that  nothing  could  be  accomplished  by  the  ad- 
ministration until  a  final  decision  of  the  courts  in  this  matter 
could  "be  obtained.  Immediately  upon  entering  ofiice  I  had  ap- 
pointed Mr.  Clarence  S.  Darrow  as  special  traction  counsel  and 
Glen  E.  Plumb  and  Edgar  B.  Tolman  as  assistant  traction  coun- 
sel. These  gentlemen,  together  with  the  corporation  counsel, 
Hon.  James  Hamilton  Lewis,  pushed  the  pending  suit  with 
great  vigor.  On  March  12,  1906,  the  highest  tribunal  in  the 
land,  the   Supreme   Court  of  the   United   States,   declared  these 


MUNICIPAL   OWNERSHIP  59 

so-called  99-year  claims  without  foundation.  The  city  thoroly 
defeated  the  companies  at  every  point. 

In  January,  1906,  it  became  evident  that  the  ordinances  ex- 
tending the  franchises  would  never  be  ratified  by  the  people 
even  if  passed  by  the  council.  Prominent  citizens  and  news- 
papers who  at  first  had  opposed  the  mayor's  policy  now  advo- 
cated the  defeat  of  the  ordinances  extending  franchises  which 
had  been  framed  up  in  committee.  The  spring  election  was 
approaching.  This  was  the  situation  when  unexpectedly,  on 
January  19,  1906,  on  receipt  of  the  report  of  the  transportation 
committee,  the  council  passed  the  ordinance  framed  by  the 
mayor,  authorizing  the  submission  to  the  people  of  the  question 
as  to  whether  the  Mueller  certificates  proposed  should  be  issued. 

The  issue  for  the  spring  election  was  thus  clearly  defined 
and  was  fiercely  contested  before  the  people.  Two  ordinances 
were  submitted  for  approval  at  the  polls.  One  authorized  the 
Mueller  certificates ;  the  other,  the  operation  of  the  road  when 
acquired  by  the  city.  Notwithstanding  the  solid  opposition  of 
the  Republican  party,  the  opposition  of  the  press  and  the 
hostility  of  Democratic  leaders,  the  ordinance  authorizing  the 
certificates  carried  by  about  four  thousand  majority.  The  ordi- 
nance authorizing  the  operation  of  the  railroad  lacked  the  req- 
uisite number  of  votes,  60  per  cent,  being  needed,  altho  it 
received  a  majority  of  about  twelve  thousand. 

Immediately  after  this  election  I  instructed  our  traction 
counsel,  Messrs.  Walter  L.  Fisher  and  Samuel  Adams,  to  test 
in  the  courts  the  validity  of  the  Mueller  certificates  as  au- 
thorized by  the  popular  vote,  and  of  the  statute  which  author- 
ized the  city  to  own  and  operate  street  -cars.  The  Circuit  Court 
of  Cook  County  upheld  the  validity  of  the  certificates,  the 
ordinance  and  the  Mueller  law.  An  appeal  has  been  taken 
to  the  Illinois  Supreme  Court,  which  I  am  confident  will  up- 
hold the  decision   of  the  lower  court  in  every  particular. 

When  this  is  accomplished  our  long  and  successful  fight 
will  be  over,  for  I  have  no  doubt  that  we  shall  negotiate  the 
certificates  readily  and  be  able  to  purchase  the  railway  proper- 
ties with  the  proceeds. 

At  the  present  time  the  city  is  negotiating  with  the  traction 


6o  SELECTED    ARTICLES 

companies  in  accordance  with  a  letter  which,  as  mayor,  I 
addressed  to  the  chairman  of  the  transportation  committee. 
In  that  letter  I  suggested  that,  pending  the  litigation  which 
would  settle  the  validity  of  the  Mueller  law  and  ordinance, 
if  the  present  companies  were  able  and  willing  to  enter  into 
an  agreement  to  sell  to  the  city  all  of  their  tangible  property 
and  unexpired  franchises  and  rights,  at  a  price  to  be  fixed  at 
once,  and  to  undertake  the  immediate  improvement  of  their 
service,  the  city  would  be  prepared  to  enter  into  negotiations 
on  the  basis  of  paying  the  fair  cash  value  of  the  tangible  and 
intangible  property  and  actual  cost  of  improvements,  together 
with  reasonable  interest  thereon.  Pending  payment,  the  roads 
were  to  be  operated  by  the  companies  so  as  to  provide  for  a 
sinking  fund  out  of  the  proceeds  to  apply  on  the  purchase  price. 

The  companies,  in  response  to  my  letter,  assented  to  the  car- 
rying on  of  negotiations  on  these  lines,  and  have  placed  an 
excessive  value  upon  their  properties,  some  $73,000,000.  The 
city  has  employed  competent  engineers  to  value  the  plants,  the 
commission  consisting  of  Professor  Cooley,  dean  of  the  en- 
gineering college  of  the  University  of  Michigan ;  Bion  J.  Arnold 
and  A.  B.  duPont.  Failing  to  reach  an  agreement  with  the 
companies,  we  shall  offer  to  arbitrate,  in  accordance  with  pro- 
visions in  the  ordinances  under  which  the  companies  have  been 
operating.  Should  an  agreement  become  impossible,  we  shall 
place  our  certificates  on  the  market  for  sale  and  with  the  pro- 
ceeds build  new  modern  lines. 

Upon  the  maturity  of  these  certificates,  all  of  them,  in  my 
judgment,  can  be  paid  in  full,  and  the  people  then  owning  their 
plant,  can  proceed  to  reduce  fares  to  the  lowest  possible  cost, 
as  has  been  done  in  all  the  great  cities  of  England  and  in 
many  of  the  great  cities  of  Germany,  Austria-Hungary,  Aus- 
tralia and  Italy. 

Corruption  of  public  officials,  the  stealing  of  public  property, 
favoritism  in  the  selection  of  employees,  strikes,  inefficient 
service,  exorbitant  charges  and  insolence  toward  and  defiance 
of  the  public  has  marked  the  history  of  private  management 
of  public  utilities  in  Chicago  and  elsewhere  in  America.  The 
people  have  called  a  halt.     The  demand  of  the  people  to  place 


MUNICIPAL   OWNERSHIP  6i 

a  check  upon  public  corruption  by  and  with  the  referendum, 
at  first  feeble  and  unheeded,  has  swelled  into  a  roar  whose 
reverberations  are  heard  in  the  council  chambers  of  the  land, 
as  well  as  in  the  temples  of  finance. 

In  my  judgment  the  people  are  in  no  condition  to  be  longer 
trifled  with ;  no  longer  will  they  be  despoiled  and  flouted  as 
they  have  been  in  the  past,  and  the  legislator,  councilman  or 
alderman  who  remains  deaf  to  the  cry  of  the  people  and  heed- 
less of  the  popular  demand  for  municipal  ownership  under 
honest  civil  service  rules  and  the  referendum,  may  as  well 
prepare  for  sepulture  under  a  stone  upon  which  will  be  written 
the   epitaph,   "He   served   the  corporations — not  the  people." 


\/ Cosmopolitan.   30:   557-60.  March,   1901. 

Advantages   of   Public   Ownership   and   Management  of   Natural 

Monopolies.     Richard  T.  Ely. 

It  may  be  said  in  favor  of  public  ownership  and  public 
management,  that  b}^  this  means  the  regulation  required  by 
the  general  public  arises  out  of  the  nature  of  public  property. 
When  private  persons  manage  private  property,  the  natural 
thing  for  them  to  do  is  to  manage  it  in  the  interests  of 
private  individuals.  W^ien  public  property  is  managed  by  public 
authorities,  the  natural  thing  is  to  manage  it  in  the  interests  of 
the  general  public,  because  the  ownership  is,  by  the  very  hy- 
pothesis, vested  in  the  general  public.  The  easy  and  natural  thing 
to  do  is  to  manage  property  in  the  interest  of  its  owner.  It 
is,  as  a  rule,  right  and  proper  to  manage  private  property  in 
the  interest  of  private  persons,  and  not  infrequently  it  is 
gross  abuse  of  a  trust  to  manage  it  otherwise.  It  is,  on  the 
other  hand,  a  perversion  of  public  property  to  manage  it  in  the 
interests  of  private  persons.  As  in  the  case  of  private  owner- 
ship of  natural  monopolies  it  requires  a  pressure  diverting  prop- 
erty from  that  management  springing  up  out  of  the  nature  of 
property,  to  secure  the  public  ends,  so  it  is  only  through  an 
open    and    acknowledged    abuse    of    a    public    trust    that    public 


62  SELECTED    ARTICLES 

property  can  be  otherwise  managed  than  to  promote  the  general 
welfare. 

It  is  a  decided  advantage  of  public  ownership  coupled  with 
public  management,  that  it  makes  clear  the  issues  before  us  with 
respect  to  natural  monopolies.  Exactly  what  the  situation  is, 
may  readily  be  discovered.  The  source  of  evils  which  exist 
can  be  ascertained,  and  steps  taken  to  introduce  appropriate 
remedies.  Naturally  there  may  be  resistance,  and  frequently 
there  is  resistance,  on  the  part  of  private  interests  to  a  wise 
management  of  public  property  and  public  business.  This  re- 
sistance has  various  sources.  Partisan  politics  will  occur  to 
every  one  as  one  source.  The  low  and  degraded  view  of  public 
office  as  a  reward  of  party  service  and  not  as  a  public  trust, 
is  one  of  the  great  evils  against  which  the  American  people 
have  been  contending  for  a  generation.  On  the  whole  this 
contest  has  been  successful,  although  there  still  remains  much  to 
be  done  to  bring  about  popular  enlightenment  concerning  the 
true  nature  of  public  office  and  to  cultivate  a  finer  sense  of 
right  and  wrong  with  respect  to  it.  A  more  dangerous,  because 
frequently  a  more  powerful  and  always  a  more  insidious, 
source  of  resistance  to  right  management  of  public  undertakings, 
is  found  in  the  selfish  interests  of  private  corporations  and 
powerful  private  combinations  of  one  sort  and  another.  It 
was  the  political  machine  of  Philadelphia  acting  in  harmony 
with  a  private  corporation,  which  turned  over  the  public  gas- 
works to  a  private  corporation.  At  the  time  this  article  is  be- 
ing written,  this  same  political  machine  is  opposing  the  im- 
provement of  the  public  water-works,  and  is  favoring  a  plan  to 
lease  them  to  a  private  corporation.  The  people  of  Philadelphia 
have  already  approved  a  loan  the  design  of  which  is  to  improve 
the  public  water-works,  but  the  political  machine,  in  the  service 
of  private  interests,  resists  needed  improvements.  There  is 
strong  reason  to  suspect  that  private  parties  in  their  own  private 
interests  sometimes  do  what  they  can  to  make  public  enterprises 
a  failure,  and  there  is  also  a  very  wide-spread  effort  to  repre- 
sent public  activities  of  every  kind  as  much  worse  than  they 
really  are,  coupled  with  a  reluctance  to  acknowledge  merit  on 
the  part  of  those  engaged  in  the  public  service.     In  consequence 


MUNICIPAL   OWNERSHIP  63 

of  this,  it  becomes  necessary  to  go  behind  the  politician,  often 
a  mere  tool,  to  find  the  real  power  behind  him,  and  this  real 
power  may  belong  to  the  very  respectable  elements  of  the  com- 
munity. 

There  must  inevitably  be  a  struggle  to  establish  the  policy 
of  public  ownership  of  natural  monopolies,  but  when  this  policy 
is  once  thoroughly  established,  when  it  comes  to  be  so  thoroughly 
approved  and  so  firmly  rooted  in  our  life  that  an  effort  to 
upset  it  is  manifestly  hopeless,  it  must  enlist  in  the  cause  of 
good  government  the  intelligent  and  well-to-do  element  in  the 
community.  There  will  then  be  established  a  harmony  of  in- 
terests which  is  now  so  sadly  wanting. 

It  is  often  said,  it  is  said,  every  day  by  press  and  pulpit,  that  the 
better  class  of  the  community  is  apathetic.  But  why  is  this  the 
case?  What  is  the  deeper,  underlying  cause?  When  the  better  class 
of  the  community  feels  itself  and  its  interests  seriously  threat- 
ened, it  is  by  no  means  apathetic.  Take  the  better  class  of 
New  York  and  Boston  in  its  attitude  upon  the  question  of 
silver  monometallism.  This  better  class  has  a  very  clear  idea 
concerning  its  own  interests  with  respect  to  the  free  and  un- 
limited coinage  of  silver,  and  will  any  one  claim  that  with  re- 
spect to  this  question  it  is  apathetic?  But  what  is  the  interest 
of  this  better  class  with  respect  to  excellence  in  municipal  gov- 
ernment? W^ould  not  their  franchises  suffer,  would  not  the 
terms  under  which  they  are  able  to  serve  the  public  with  their 
property,  be  changed  for  the  worse  for  them,  by  municipal 
reform?  Probably  in  every  great  city  in  which  the  policy  of 
private  ownership  of  municipal  monopolies  obtains,  the  number 
of  persons  financially  interested  in  this  private  ownership  ex- 
ceeds by  far  the  number  of  officeholders.  Can  the  apathy  and 
indifference  they  show  be  a  source  of  surprise?  Must  it  not, 
on  the  other  hand,  be  a  source  of  surprise  that  in  many  of  our 
cities  there  is  so  much  effort  as  we  actually  see  on  the  part 
of  the  well-to-do  to  establish  good  municipal  government,  even 
when  this  involves  a  considerable  amount  of  self-sacrifice? 

We  indulge  in  no  attacks  on  individuals  or  classes.  We 
are  attempting  to  show  what  course  of  action  men's  interests 
lead  them  to  take,  and  we  ask  this  question  :  Can  we  base  a  pub- 


64  SELECTED    ARTICLES 

lie  policy  upon  the  hypothesis  that  a  large  and  powerful  class 
in  the  community  will  act  in  a  manner  contrary  to  its  own 
interests? 

In  all  the  cities  of  the  world  where  there  is  a  thoroughly 
established  policy  of  public  ownership  and  management,  the 
well-to-do  find  that  their  interests  are  bound  up  with  those 
of  good  government.  It  is  a  great  thing  so  to  clarify  the 
situation  that  we  can  find  out  exactly  what  are  the  obstacles 
in  the  way  of  improvement. 

Closely  connected  with  what  has  gone  before,  it  must  be 
observed  that  while  malignant  forces  tending  to  degradation 
will  still  exist  under  public  ownership,  some  of  the  more  power- 
ful forces  of  corruption  will  disappear.  The  purity  of  public 
life  will  then  simply  depend  upon  the  general  level  of  intelli- 
gence and  morality,  and  if  that  is  as  high  in  New  York  as  in 
Berlin,  there  is  no  reason  why  in  the  course  of  time  New 
York  should  not,  equally  with  Berlin,  secure  a  model  govern- 
ment. 

Another  advantage  resulting  from  public  ownership  of  natural 
monopolies,  coupled  with  excellence  in  their  management, 
would  be  the  fair  and  impartial  conditions  under  which  private 
business  would  hereafter  be  conducted.  We  have  now  a  class 
of  dependent  monopolies,  monopolies  which  are  not  such  in 
their  own  nature  but  such  because  they  receive  favors  from 
monopolistic  enterprises.  It  is  at  least  questionable  whether  in 
agriculture,  manufacture  or  commerce  any  monopoly  could  be 
built  up  without  public  or  private  favors.  If  an  agricultural, 
manufacturing  or  commercial  business  is  not  aided  by  positive 
legislation,  and  is  not  assisted  by  special  railway  rates  or  favors 
of  any  sort  coming  from  any  other  monopolistic  undertaking, 
the  writer  is  not  prepared  to  admit  that  it  can  become  a  monopoly. 
An  exception,  of  course,  is  made  of  those  enterprises  based  upon 
very  limited  supplies  of  natural  treasures,  such  as  anthracite 
coal. 

Enlarging  the  field  of  public  industry  would  give  a  career 
in  the  service  of  the  public  to  talent ;  it  would  tend  to  establish 
a    balance    between    the    advantages    of    public    and    private    life, 


MUNICIPAL    OWNERSHIP  65 

and  could  not  fail  in   an  intelligent  and,  on  the   whole,   upright 
community  to  ennoble  public  life. 

It  is  gratifying  to  see  that  to  an  ever-increasing  extent  these 
truths,  not  after  all  difficult  of  comprehension  when  serious  at- 
tention is  given  to  them,  are  coming  to  be  accepted.  While 
this  article  is  being  written,  a  campaign  is  in  progress  in  one 
city  in  which  the  candidate  of  the  Republican  party  has  given 
as  clear  expression  to  these  truths  as  one  could  desire.  As  re- 
ported by  a  prominent  newspaper,  he  states  his  views  in  part 
in  these  words :  "If  elected,  I  expect  to  continue  in  my  at- 
tempts to  carry  out  the  principles  of  my  platform  of  two  wears' 
ago,  reiterated  in  the  platform  of  this  year,  for  the  public 
ownership  and  control  of  public  utilities,  such  as  water, 
gas  and  electric-light  plants,  street-railways  and  telephones. 
I  should  like  to  see  a  civil  service  law  enacted 
to  go  hand  in  hand  with  these  reforms,  but  I  do  not  believe 
that  we  should  wait  for  such  a  measure.  I  am  firmly 
of  the  opinion  that  the  public  ownership  of  such  franchises 
will  of  itself  bring  about  civil  service  reform.  Municipal  own- 
ership will  do  more  than  any  other  one  thing  to  improve  city 
government  in  America.  In  my  opinion  much  of  the  poor 
and  bad  government  in  city  affairs  is  due  to  the  influence  of 
franchise-holding  corporations.  It  is  to  their  interest  to  have 
poor  government,  to  secure  the  election  and  appointment  of  offi- 
cials whom  they  can  control  to  their  selfish  ends.  We  have 
seen  examples  of  this  in  our  own  city,  \vhere  local  corporations 
exerted  their  influence  against  salutary  measures  looking  toward 
civil  service  and  other  similar  reforms." 

On  the  other  hand,  the  platform  adopted  by  the  Democratic 
party  in  another  city  in  the  campaign  which  is  at  the  same 
time  in  progress,  shows  that  the  recognition  of  these  principles 
which  the  writer  is  endeavoring  to  establish  in  this  article  is 
not  confined  to  any  one  party.  The  follow^ing  is  one  of  the 
planks    in    this    platform : 

"We  believe  the  prevailing  corruption  and  bribery  in  all  large 
cities  to  be  caused  by  the  fact  that' public  utilities  are  controlled 
l)y  private  corporations.  The  dependent  relation  of  corpora- 
tions  upon  the  good  will  of  aldermen,  coupled  with  the   frailty 


66  SELECTED   ARTICLES 

of  human  nature,  makes  it  impossible  to  secure  official  honesty. 
While  there  are  disadvantages  attendant  upon  municipal  control 
and  ownership  of  public  utilities,  they  are  insignificant  compared 
to  the  wholesale  corruption  and  bribery  incident  to  control  by 
private  corporations." 

The  methods  to  achieve  the  desired  transformation  in  our 
public  life  are  many.  Every  improvement  in  the  civil  service 
is  helpful.  The  diffusion  of  knowledge  begetting  clear-cut  ideas 
concerninc^  the  nature  of  public  corruption,  as  well  as  sound 
ideas  concerning  social  progress,  is  the  chief  force  producing 
a  movement  in  the  right  direction,  and  the  number  of  educa- 
tional agencies  at  work  in  the  enlightenment  of  public  opinion 
is  as  gratifying  as  it  is  surprising  to  one  who  has  not  considered 
the  subject.  The  popular  educational  agencies  which  have  come 
into  operation  in  the  United  States  during  the  present  generation, 
are  something  without  a  parallel  in  the  world's  history.  We 
have  our  great  Chautauqua  movement  and  other  similar  move- 
ments almost  innumerable.  We  have  our  University  Extension 
movement,  together  with  the  unparalleled  activities  of  our 
universities  in  all  branches  of  learning  which  pertain  to  public 
life.  Our  state  universities,  a  part  of  the  governmental  ma- 
chinery of  our  states,  are  undergoing  an  expansion  and  an 
improvement  which  would  have  been  deemed  incredible  even 
ten  years  ago.  Once  more,  we  have  a  serious  proposal  to 
establish  a  national  university  at  Washington,  and  if  this  is 
ever  established  it  will  no  doubt  become  a  civic  academy,  doing 
for  the  civil  service  something  like  the  work  which  West  Point 
and  Annapolis  do  respectively  for  the  army  and  the  naval  service. 
While  the  influence  of  the  press  is  often  devoted  to  private 
interests,  it  is  gratifying  to  see  the  stand  which  not  infrequently 
influential  newspapers  take  in  behalf  of  the  public,  even  against 
powerful  private  interests.  At  the  same  time,  the  public  con- 
science is  being  educated  by  the  pulpit.  Most  gratifying  is  the 
public  spirit  of  many  men  of  large  wealth  who  are  active  in 
the  promotion  of  good  government,  while  organizations  of 
business  men,  for  example  the  merchants  of  New  York,  are 
frequently  taking  a  noble  stand  in  defense  of  popular  rights. 
We   may,   then,    in    conclusion    say   that    while   the    obstacles   to 


MUNICIPAL   OWNERSHIP  (^7 

reform  are  many  and  progress  must  in  the  nature  of  things  be 
slow,  the  situation  is  on  the  whole  a  hopeful  one.  We  must  not 
expect  great  changes  this  year  or  next  year,  but  we  may  feel 
pleased  if  there  is  a  steady  movement  in  the  right  direction. 
Nor  must  we  be  fanatical  adherents  of  any  one  particular  reform. 
Social  improvements  come  in  many  different  ways  and  from 
every  direction.  Each  one  sees  but  a  fractional  part  of  the 
truth,  and  must  be  satisfied  if  he  contributes  a  little  part  to 
the  grand  work  of  social  amelioration. 


■^  North  American  Review.  182:  701-8.  May,  1906. 
Municipal  Ownership  of  Public  Utilities.    George  Stewart  Brown. 

Progressive  Democrats  are  for  municipal  ownership,  pri- 
marily, because  they  believe  in  democracy.  They  believe  (i)  that 
competition  in  the  public  services  is  impracticable;  (2)  that 
municipal  ownership  will  pay,  either  in  cash  savings  to  the 
taxpayer  or  in  cheaper  and  better  service;  (3)  that  municipal 
ownership  is  a  political  necessity,  and  will  remove  the  main 
and  most  threatening  source  of  political  corruption. 

Competition  in  Public-Service  Industries  is  Impracticable. 
There  is  a  fundamental  difference  between  a  corner  grocery, 
for  instance,  which  can  spring  up  anywhere,  and  an  industry  like 
a  gas  company,  whose  very  existence  depends  on  a  grant  from 
government,  and  whose  first  nourishment  is  the  right  to  use  the 
property  of  the  community,  the  public  streets. 

In  Baltimore,  ^Maryland,  the  native  city  of  the  writer,  there 
was  for  a  time  so-called  competition  in  every  public-service 
industry;  the  result  was  some  temporary  benefit,  perhaps,  in  re- 
duced rates  or  improved  service ;  but  in  the  end  came  con- 
solidation, with  a  capitalization  bearing  interest  on  two  fran- 
chises instead  of  one,  and  a  not  inequitable  plea  on  the  part  of 
the  combined  company  to  the  effect  that  "you,  the  people,  have 
forced  us  to  this  condition  of  over-capitalization,  and  must  help 
us  bear  the  burden." 

This  has  resulted  in  confusion  worse  confounded  both  to  the 
corporations  themselves  and  to  the  public  mind,  which  has  failed 


68  SELECTED    ARTICLES 

to  grasp  the  real  nature  of  the  problem.  So-called  competition 
in  public-service  industries  is  not  competition  at  all, — it  is  war. 
The  stronger  company  either  buys  out  the  weaker  at  once  without 
further  parley,  or  it  divides  the  territory  with  the  weaker,  if  the 
territory  is  big  enough  to  divide,  and  agrees  on  rates ;  or  it 
temporarily  lowers  the  rates  below  the  point  of  profit  until  the 
weaker  succumbs.  As  a  matter  of  fact,  with  the  exception  of  the 
telephone  service,  industrial  public-service  war  has  had  but  one 
universal  result,  consolidation.  Not  a  single  instance  to  the  con- 
trary can  be  cited.  The  tendency  to  consolidation  has  become 
so  strong  that  lighting  companies  furnishing  different  kinds  of 
lights,  like  gas  and  electricity,  are  now  combining,  although  they 
largely  supply  a  different  field  and  class  of  customers.  No  in- 
genuity of  the  most  skilled  lawyers  can  prevent  consolidation. 
On  the  other  hand,  when  a  few  consolidations  here  and  there 
have  been  found  illegal,  a  new  method  has  always  been  invented 
to  keep  the  separate  interests  together,  or  to  reunite  them  in  fact 
if  not  in  name. 

Granted  that  a  public  service  must  be  a  monopoly,  the  people 
will  not  long  tolerate  a  monopoly  in  private  hands.  They  will 
perhaps  try  regulation  first ;  they  will  sooner  or  later  insist  that, 
if  a  monopoly,  it  must  be  a  government  monopoly,  operated 
solely  for  the  public  benefit,  instead  of  a  private  monopoly,  op- 
erated primarily  for  the  purpose  of  private  gain,  and  only  in- 
cidentally for  the  service  of  the  people. 

Municipal  Ownership  Will  Pay 


V^/ 


One  item  is  almost  universally  neglected  in  considering  the 
financial  success  or  failure  of  city  ownership,  and  that  is  the 
capitalized  value  of  the  right  to  do  the  particular  service  through 
the  use  of  the  public  property  in  the  streets.  Let  us  assume,  for 
illustration,  two  companies  in  cities  of  the  same  size  with  their 
two  tramway  services,  or  electric-lighting  services,  costing  the 
same  sum  for  instalment  and  with  the  same  rates  and  an  equally 
efficient  management — two  business  enterprises,  that  is  to  say, 
earning  exactly  the  same  amount  of  money,  and  identical  in  their 
conditions,  except  that  one  is  public  and  the  other  private. 


MUNICIPAL   OWNERSHIP  69 

Let  us  suppose  that  the  value  of  the  actual  material  property 
of  each,  bought  and  constructed,  is  $50,000,000,  and  that  the 
private  concern  pays  interest  and  dividends  on  a  capitalization  of 
$100,000,000,  the  other  $50,000,000  being  the  intangible  value 
created  by  the  permit  held  by  the  private  concern  from  govern- 
ment to  use  its  combined  material  properties  in  connection  with 
the  public  streets  for  the  required  public  service. 

Thus  we  have  the  interest  on  $50,000,000  saved  for  our  equally 
efficient  city  service.  That  is  the  saving  to  the  city,  or  the  margin 
of  efficiency,  which  our  supposed  public  concern  effects  as  com- 
pared with  the  equally  well-managed  private  company.  Now,  in 
Baltimore,  for  instance,  the  attempted  easement  assessments,  un- 
der a  plan  similar  to  the  New  York  franchise-tax  law,  amounted 
to  $23,000,000,  and  they  were  moderate,  because  they  did  not 
attempt  to  reach  all  the  intangible  value,  but  only  so  much  of  it 
as  came  directly  from  the  use  of  the  city  streets.  Yet  this  is  half 
the  city  debt ;  and,  if  the  same  ideal  condition  had  existed  in 
Baltimore  as  is  supposed  in  our  illustration,  the  effect  of  public 
management  would  have  been  like  cutting  the  debt  in  two. 

To  return  to  our  illustration.  Fifty  million  dollars  is  paid  by 
the  first  city  to  the  private  company  for  rendering  a  govern- 
mental function,  whereas  the  other  city  saved  that  amount  by 
performing  that  function  itself ;  or,  to  state  it  in  a  different  way, 
the  public  concern  would  have  to  be  only  half  as  efficient  as  the 
private  company  to  produce  the  same  result  to  the  city. 

It  is  absurd  to  attenipt  to  settle  finally  the  right  or  wrong  of 
the  policy  of  municipal  ownership  by  reference  to  the  results  of 
any  specific  instance,  just  as  it  would  be  ridiculous  to  conclude 
that  individual  failures  or  successes  in  the  banking  business 
demonstrated  the  folly  or  wisdom  of  following  that  business  as 
a  calling.  Yet  Philadelphia,  the  stock  example  of  the  opponents 
of  municipal  ownership,  is  always  so  quoted,  without  regard  to 
the  question  what  Philadelphia  gained  in  the  increment  of  fran- 
chise value  while  it  held  on  to  its  public  service.  Compare  the 
advantages  which  Philadelphia  gets  out  of  its  present  lease  of  the 
gas-works  with  the  condition  of  Baltimore  with  a  company  op- 
erating under  a  perpetual  franchise.  Now,  Philadelphia's  present 
advantage  is  due  to  the  fact  that,  at  the  time  of  making  the  lease, 


70  SELECTED    ARTICLES 

it  had  a  large  accrued  franchise  value  to  dispose  of,  and  who  can 
say  offhand  that  its  long-continued  policy  of  holding  on  and 
operating  was  worse,  on  the  score  of  past  extravagance  and  de- 
bauchery, or  better,  on  the  score  of  present  advantages  derived 
incidentally   from  that  very  policy? 

The  writer  believes  it  is  a  recognition  of  the  value  of  the  cap- 
italized franchise  that  makes  us  hold  on  to  the  one  public  service 
that  is  generalh'  municipalized,  namely,  our  water-supplies.  Log- 
ically, our  reactionaries  should  advocate  the  turning  over  of  our 
water-supplies  to  private  enterprise.  Why  not,  if  municipal  own- 
ership is  so  bad? 

Whatever  the  reason,  we  seem  to  have  finally  reached  the  con- 
clusion to  hold  tight  to  what  we  have.  For,  even  in  the  most 
reactionary  communities,  any  proposition  to  give  up  a  municipal 
water  system  to  private  management  would  be  immediately 
laughed  out  of  court.  The  veriest  tryo  can  see  that  now  he  pays 
for  water  the  actual  cost,  namely,  the  low  rates  of  interest  on  city 
capital  expended  for  plant  plus  the  actual  running  expenses  of 
the  department,  and  that  any  balance  goes  to  a  lowering  of  his. 
tax  rate,  while,  were  it  farmed  out,  he  would  at  once  begin  to  pay 
in  addition  interest  upon  the  watered  flotation  of  a  private  com- 
pany capitalized  on  its  franchise  value.  Even  if  he  thinks  the 
private  company  could-  hire  men  for  lower  wages,  save  money 
on  its  supplies  and  in  many  other  ways,  he  knows  that  the  new 
item  would  largely  exceed  any  such  savings ;  and  he  also  in- 
stinctively feels  that,  as  that  franchise  value  grows  with  increase 
of  population,  the  capitalization  on  which  he  must  give  a  fair 
return  will  grow  with  equal  pace. 

To  show  still  further  that  we  are  conscious  of  this  same  idea 
concerning  the  franchise  value  to  be  given  away,  it  is  worthy  of 
note  that,  in  considering  the  establishment  of  some  new  service, 
such  as  a  subway  for  underground  wires,  or  a  sewerage  system, 
we  invariably  favor  municipal  ownership,  entirely  without  respect 
to  making  it  pay  as  a  business  proposition. 

In  the  fight  to  put  the  wires  underground  in  Baltimore,  it  was 
clearly  recognized  that  the  way  to  do  so  was  by  a  municipal  sub- 
way. And  here  the  idea  of  municipal  profit  on  the  transaction 
was  eliminated,  the  plan  being  simply  to  charge  enough  rental 


MUNICIPAL   OWNERSHIP  71 

to  pay  interest  and  sinking-fund,  and  thus  give  the  use  of  the 
subways  to  the  private  companies  for  cost,  simply  and  solely  to 
get  the  streets  clear  of  obstructions. 

Not  charging  for  the  franchise  value  would  probably  be  the 
result  of  the  plan  proposed  as  an  alternative  to  municipal  owner- 
ship and  operation ;  that  is,  public  ownership  with  private  opera- 
tion. This  method  would  be  much  preferable  to  private  owner- 
ship, because  the  franchise  itself  would  be  reserved,  and  some  day 
might  be  utilized  without  extra  cost  by  the  city  itself. 

Again,  in  the  matter  of  sewerage  in  Baltimore,  only  once  was 
it  seriously  proposed  to  farm  out  the  system  to  a  private  com- 
pany. The  proposition  to  grant  a  franchise  was  coupled  with  fair 
promises  of  the  benevolence  the  company  would  show  to  the  city 
— how  it  would  relieve  the  city  from  an  enormous  municipal  debt 
and  charge  fair  and  reasonable  rates ;  but  immediately,  with  loud 
and  universal  public  condemnation,  the  proposal  was  buried  out 
of  sight.  Its  opponents  called  it  a  scheme  for  "graft,"  a  "gi- 
gantic steal,"  etc.  Why  graft?  Why  a  steal?  What  was  there 
to  steal  except  the  franchise  value,  which,  of  course,  would  have 
been  abundantly  capitalized?  A  distinct  popular  recognition  of 
the  point  I  am  trying  to  make. 

The  margin  of  efficiency  saved  by  the  reservation  of  the  fran- 
chise value,  coupled  with  the  lower  interest  rate  on  municipal, 
as  compared  with  private,  loans  (with  the  promoters'  and  bank- 
ers' commissions  on  the  latter),  must  be  more  than  used  up  by 
higher  wages,  political  debauchery  and  extravagance  before  pub- 
lic operation  can  become  more  expensive  than  private  ownership. 

Besides,  there  is  no  inherent  reason  why  the  mob  of  voters 
should  not  obtain  as  good  and  successful  management  as  the  mob 
of  stockholders. 

Again,  the  increment  of  franchise  value  to  come  from  future 
increase  of  population  is  going  to  be  enormous.  We  all  believe 
in  great  increases  in  population  in  the  future  in  and  about  our 
great  cities.  The  franchise  or  right  to  serve  a  city  of  a  million 
souls  will  be  worth  more  than  twice  as  much  as  the  franchise  to 
serve  half  a  million.  If  we  buy  now  from  the  private  owners, 
including  present  franchise  value,  we  will  save  all  future  incre- 
ment, with  every  prospect  that  the  proportionate  improvement  in 


72  SELFXTED    ARTICLES 

the  governmental  service  will  be  greater  every  year  in  the  line 
of  increased  efficiency.  The  increase,  up  to  the  present  time,  in 
the  value  of  public-service  capitalizations,  has  been  almost  be- 
yond the  dreams  of  avarice.  From  the  moment  of  municipali- 
zation, this  will  become  the  property  of  the  people,  and  accrue 
to  them  as  reduced  rates,  better  service  or  lowered  tax  rates. 

Municipal  Ownership  is  a  Political  Necessity. 

Public-utility  corporations  are  the  chief  bulwark  and  support 
of  the  machine,  and  interest  in  the  questions  afifecting  vested 
privilege  means  for  the  individual  showing  such  interest  that  he 
puts  himself  outside  the  party  pale.  Give  the  "boss"  his  fran- 
chises and  the  vested  interests  behind  them,  and  you  have  the  im- 
mense modern  campaign  fund  which  alone  makes  the  machine 
possible. 

What  is  the  testimony  of  those  who  have  had  practical  ex- 
perience in  this  matter?  Ask  La  Follette,  ask  Mark  Fagan,  ask 
Tom  Johnson,  ask  Folk,  ask  Weaver,  and  they  will  answer,  with 
one  accord,  that  their  breach  with  their  party  organizations  came 
when  they  attempted  to  remedy  some  abuse  which  the  masters 
of  vested  privilege,  the  franchise-holders,  were  committing,  or  to 
punish  the  perpetrators  thereof.  They  will  testify  that  it  was  not 
the  free  choice  of  subordinates,  or  the  suppression  of  petty  and 
minor  graft,  that  aligned  the  party  "boss"  against  them.  These 
were  sins,  but  forgivable  sins.  The  one  unpardonable  sin  was  to 
touch  with  a  fearless  hand  the  public-service  monopoly  question, 
or  to  punish  those  who  assist  the  machine  in  carrying  out  its 
alliance  with  business  privilege. 

No  one  now,  conservative  or  radical,  stands  for  unregulated 
monopoly,  while  all  thinkers  and  writers  on  the  subject  recognize 
public  services  as  necessary  and  natural  monopolies ;  and  it  is 
generally  admitted  that  existing  political  evils  are  primarily 
caused  by  the  presence  in  politics  of  the  public-service  corpora- 
tions, and  this  admission  involves  the  recognition  of  the  necessity 
for  some  remedy.  Certain  opponents  of  municipal  ownership 
propose  "regulation"  and  "punishment  for  the  wrong-doer." 
Now,  in  the  first  place,  "regulation"  means  what  looks  very  like 


MUNICIPAL    OWNERSHIP  yi, 

a  political  impossibility.  It  means  that  the  servant  must  regulate 
his  master ;  that  the  party  man,  who  has  been  elected  as  such, 
must  put  himself  outside  the  breastworks  of  the  organization  by 
regulating  the  party's  best  and  ever-faithful  friend,  the  cam- 
paign contributor.  This  is  not  in  human  nature.  This  is  why 
you  will  so  often  find  the  business  man  in  office,  honest  as  the 
day  is  long  in  his  private  business,  but  in  office  particularly  care- 
ful to  carry  out  his  reforms  in  places  where  they  do  not  conflict 
with  big  business  privilege. 

The  advocates  of  regulation  overlook  one  point,  which,  in  my 
opinion,  is  vital.  Regulation  of  rates  or  service  is  always  resisted 
by  the  owners ;  and  the  advocate  of  regulation  is  compelled  to  put 
himself  in  constant  antagonism  with  his  business  associates  and 
social  friends,  who  happen  to  be  owners  or  managers  of  the  par- 
ticular service  involved.  To  do  this,  to  interfere  with  the  busi- 
ness interests  of  those  with  whom  one  enjoys  the  most  pleasant 
personal  relations  in  one's  daily  walk,  is  a  disagreeable  and  often 
dangerous  thing  for  any  man  to  do. 

Yet  the  public  official  must  needs  do  this,  over  a  long  and  ag- 
gravating period  of  years,  throughout  his  w^ole  political  exist- 
ence, if  he  is  to  carry  out  a  policy  of  regulation,  or  even  attempt 
to  compel  the  public-service  corporations  to  obey  their  legal  obli- 
gations. A  battle  for  municipal  ownership  would  be  a  compara- 
tively short  conflict,  and  there  would  be  nothing  to  disturb  per- 
sonal relations,  as  soon  as  it  became  an  accomplished  fact. 

This  social  and  business  association,  combined  with  the  fear 
of  wrath  to  come  in  the  shape  of  a  contribution  which  will  set 
their  party  machine  against  them,  explains  the  failure  of  execu- 
tive officers,  otherwise  honest  and  efficient,  to  take  up,  on  their 
own  initiative,  cases  of  plain  violation  of  public  obligations  on  the 
part  of  these  companies.  This  is  what  the  organizations  and  the 
companies  mean  by  a  "safe"  man.  Every  nomination  for  import- 
ant office  is  scrutinized  from  their  own  point  of  view  by  the  rep- 
resentatives of  these  vested  interests.  Fagan,  La  Follette,  and 
Johnson  are  not  considered  "safe."  because  they  have  touched  the 
vital  pocket-nerve.  To  obtain  their  renominations,  they  have  each 
been  compelled  to  capture  their  party,  over  the  heads  of  its  old 
organization,  and  practically  to  construct  a  new  party  of  their 


74  SELECTED    ARTICLES 

own,  and  fight  the  combined  power  of  the  public-service  corpora- 
tions, which  immediately  rallied  around  the  banner  of  the  oppos- 
ing party.  The  fact  that  they  have  succeeded  shows  that  the 
people  have  learned  to  protect  their  government,  and  indicates 
strongly  that  they  will  be  responsive  to  the  necessities  which 
municipal  ownership  brings  of  a  more  certain  tenure  of  office  in 
the  public  service  and  a  greater  governmental  efficiency. 

In  every  case  where  "regulation"  has  seriously  been  attempted, 
long  and  tedious  litigation  has  been  the  result.  Witness  Roose- 
velt's Ford  Law  which,  though  passed  in  1899,  has  never  yet  been 
enforced.  Witness  La  Follette's  rate  legislation  and  Johnson's 
efforts  for  three-cent  fares.  If  the  litigation  is  successful,  it  in- 
volves the  election  of  successive  administrations,  who  are  firm 
believers  in  the  same  policy,  to  keep  the  "regulation"  going ;  and 
this,  in  turn,  means  a  continuous  political  warfare,  fraught  with 
all  these  necessary  antagonisms  and  involving  a  steady  incentive 
to  political  corruption,  without  the  definite  results  municipal 
ownership  would  secure. 

Municipal  ownership  is  only  beginning  to  be  tried  in  this  coun- 
try, although  a  start  is  being  made  in  the  electric-lighting  service, 
some  800  plants,  large  and  small,  having  been  established,  accord- 
ing to  Mr.  McCarthy,  the  legislative  statistician  of  Wisconsin. 
But  time  enough  has  not  rolled  by  to  make  history  and  show  suc- 
cess or  failure.  Private  ownership,  on  the  other  hand,  has  ex- 
isted for  a  long  time,  and  yet  no  important  instance  can  be  cited 
of  successful  "regulation"  in  any  city.  In  the  cities  where  it 
has  been  attempted,  like  Chicago,  Cleveland,  New  York  and 
Detroit,  the  sentiment  for  municipal  ownership  is  strongest.  It 
is  not  too  much  to  say  that,  for  political  reasons,  "regulation" 
either  has  not  been  attempted,  or  where  attempted  has  failed. 

If  we  are  to  measure  efficiency  by  something  more  than  dollars 
and  cents,  if  elements  like  comfort  and  convenience  and  con- 
science and  political  freedom  are  to  count  for  anything,  we  must 
by  cooperation,  through  the  medium  of  our  city  governments, 
furnish  the  people  with  those  necessities  which,  from  the  nature 
of  the  situation,  ordinary  competitive  business  cannot  furnish, 
and  as  to  which  they  must  either  be  protected  by  government  or 
taxed  to  make  a  watered  franchise  pay. 


MUNICIPAL   OWNERSHIP  75 

These  are  real  functions  of  government  according  to  the  true 
doctrine  of  "'laissez-faire."  The  philosophers  of  that  school  did 
not  hesitate  to  provide  a  police  force  to  prevent  private  exploita- 
tion, to  establish  a  tax-collecting  department  instead  of  farming 
out  the  taxing  power.  But  we  have  handed  over  the  public  prop- 
erty in  the  streets  to  private  corporations,  and  given  them  a 
power,  monopolistic  in  its  nature,  to  furnish  public  necessities ; 
and  within  limits  the  owners  have  the  power  to  charge  or  tax  the 
people  for  this  service. 

We  who  believe  in  public  ownership  believe  in  radical  reform 
as  we  believe  in  democracy.  We  want  to  make  democracy  free 
and  able  to  handle  the  big  propositions  for  popular  benefit,  as  well 
as  the  small  ones.  We  hold  that,  if  we  merely  get  good  men  in 
office  who  will  look  after  and  trample  upon  the  small  grafters, 
we  accomplish  something;  but  to  give  real  justice  to  the  people, 
we  must  stop  the  big  leaks  involving  millions,  as  well  as  the  small 
leaks  involving  hundreds  and  thousands.  To  fight  the  "boss" 
successfully,  you  must  cut  off  his  supplies,  his  campaign  con- 
tributions. You  must  take  away  the  special  privilege  of  the  man 
behind  the  '"boss,"  the  public-utility  captain,  and  turn  him  from 
a  natural  enemy  of  government  into  an  ordinary  unprivileged 
citizen  and  the  friend  of  progress. 

Annals  of  the  American  Academy.  27:  37-65.  January,  1906. 

Municipal  Ownership  and  Operation  of  Street  Railways  in  Ger- 
many.   Leo  S.  Rowe. 

Any  attempt  to  determine  the  success  or  failure  of  municipal 
management  of  street  railways  in  Germany  must  be  based  upon  a 
comparison  of  public  with  private  management.  A  careful  review 
of  the  experience  of  German  cities  will  show  that  private  control 
has  been  singularly  unprogressive.  This  has  been  due,  in  part  at 
least,  to  the  onerous  conditions  under  which  the  original  franchise 
grants  were  made.  The  companies  did  not  feel  justified  in  incur- 
ring the  risks  involved  in  making  improvements  on  a  large  scale 
or  in  extending  the  service  into  the  outlying  districts  of  the  city. 
Impressed  with  the  lessons  of  this  experience  we  find  the  more 
recent  franchise  grants  specifying  minutely  the  streets  over  which 
the  service  must  be  extended. 


76 


SELECTED    ARTICLES 


The  relation  between  city  and  street  railway  corporations  in 
Germany  seems  to  be  exactly  the  reverse  of  that  in  the  United 
States.  Here  the  companies  are  constantly  seeking  the  right  to 
extend  their  lines  into  new  districts,  whereas  in  Germany  the 
municipal  authorities  are  engaged  in  a  constant  struggle  to  secure 
from  the  companies  an  extension  of  the  service.  This  difference 
in  the  attitude  of  the  companies  toward  the  extension  of  the 
service  is  due  in  part  to  the  broader  spirit  of  enterprise  of  Ameri- 
can corp'irations,  but  the  main  reason  is  to  be  found  in  the  fact 
that  the  German  companies  were  aware  that  every  new  grant 
from  the  city  would  be  accompanied  by  a  demand  for  such  a  per- 
centage of  gross  receipts  as  would  considerably  diminish  their 
dividends.  It  is  not  surprising,  therefore,  that  the  German  com- 
panies have  shown  a  conservatism  which  is  usually  interpreted 
as  lack  of  enterprise  and  inability  to  discount  the  future. 

We  have  seen  that  the  movement  toward  municipalization 
was  largely  determined  by  the  antagonism  between  the  cities  and 
the  street  railway  companies,  growing  out  of  the  desire  of  the 
city  to  secure  a  more  rapid  extension  of  the  service.  If  at  the 
time  they  applied  for  the  right  to  substitute  electricity  for  horse 
power,  the  companies  had  more  fully  appreciated  the  value  of 
the  privilege,  it  is  likely  that  they  would  have  been  more  willing 
to  accede  to  the  wishes  of  the  city  authorities. 

The  process  of  municipalization  was  greatly  facilitated  by  the 
fact  that  under  the  German  law  the  accounts  of  public  service 
corporations  are  subjected  to  careful  public  control.  The  amount 
expended  by  each  company  for  the  construction  and  equipment 
of  the  lines  is  easily  ascertainable.  Every  dollar  of  capital  repre- 
sents actual  investment.  The  total  capitalization  of  the  companies, 
whose  lines  have  been  recently  municipalized  is  as  follows : 


Total 


Length  of  line, 
including  dou 


capitalization    ble  track  r'l'ys 


Cologne  Street  Railway  Co.. 
Nurnberg  Street  Railway  Co. 
Munich 


$1,368,625 
1.570,000 
1.500,000 


50.5 

29 

63 


Capitalization 
per  mile  of  road 


$27,101.48 
54.138.28 
23,809.52 


MUNICIPAL   OWNERSHIP  -jj 

The  net  capital  liabilities  per  mile  of  track  of  the  electric  sur- 
face railways  of  the  United  States  is  $92,114.  In  the  cities  with  a 
population  of  500,000  and  over,  the  net  capitalization  per  mile  of 
track  reaches  the  enormous  sum  of  $182,775.  In  New  York  City 
the  capitalization  per  mile  of  track  is  $259,542;  in  Chicago, 
$109,537;  in  Philadelphia,  $165,085;  in  St.  Louis,  $198,647;  in 
Boston,  $97,353;  in  Washington,  $186,416;  in  Pittsburgh,  $185,170, 
and  in  San  Francisco,  $140,985. 

The  influence  of  this  wide  difference  in  capitalization  on  the 
expense  account  of  street  railway  lines  under  American  and 
European  conditions  is  readily  apparent.  The  percentage  of  total 
income  expended  by  American  companies  for  interest  and  liqui- 
dation charges  and  for  the  payment  of  guaranteed  dividends  to 
subsidiary  companies  is  considerably  larger  than  those  of  the 
German  companies.  The  following  table  presents  some  data  re- 
lating to  Frankfort,  Cologne  and  Munich.  Accurate  figures  for 
the  larger  American  companies  are  not  obtainable : 


Interest  and  liqui-  Percentage  of  total 

dation  charges.  expenditure. 


Frankfort 
Cologne  ... 
Nurnberg. 


$112,065.04 
204,000.00 
138,063.00 


10.6 
17.0 

28.7 


Any  attempt  to  review  the  results  of  municipal  ownership 
would  be  incomplete  without  some  reference  to  the  effect  on  the 
civic  life  of  the  communities  under  consideration.  The  introduc- 
tion of  electricity  as  a  motive  power  greatly  increased  the  possi- 
bilities of  profit,  and  led  the  companies  to  exert  the  strongest 
possible  pressure  to  secure  a  renewal  of  their  franchises  combined 
with  the  right  to  use  electrical  power.  In  the  struggle  to  secure 
these  new  rights  one  can  detect  the  first  traces  of  the  insidious 
forms  of  corruption  w^hich  have  done  so  much  to  undermine  the 
civic  life  of  American  communities.  In  a  number  of  instances, 
members  of  the  council  were  retained  as  attorneys  for  street  rail- 
way companies,  and  in  one  case  an  influential  member  of  the 
"Magistrat"  of  one  of  the  larger  cities  was  made  a  director  of  a 


78  SELECTED    ARTICLES 

street  railway  company  at  a  time  when  the  company  was  seeking 
important  privileges. 

On  the  other  hand,  in  those  cities  which  have  municipalized 
their  street  railway  system,  there  is  no  indication  of  corruption 
traceable  to  the  large  increase  in  the  number  of  city  employees. 
The  civil  service  system  is  so  highly  organized  that  the  danger  of 
political  influence  is  reduced  to  a  minimum. 

Viewing  the  situation  broadly,  it  may  fairly  be  said  that  the 
municipalization  of  the  street  railways  has  protected  these  cities 
from  the  dangers  involved  in  the  desire  of  private  corporations  to 
secure  control  of  local  administration  for  the  purpose  of  securing 
special  privileges.  In  1890  but  a  few  of  the  companies  were  de- 
claring large  dividends.  In  fact,  the  large  return  which  they  were 
compelled  to  make  for  the  franchises  under  which  they  were  op- 
erating grants  made  it  necessary  to  exercise  the  greatest  economy 
in  order  to  make  a  fair  profit  on  the  capital  actually  invested. 
The  new  franchises,  in  offering  to  the  companies  far  larger  pos- 
sibilities of  profit,  correspondingly  increased  the  temptation  to 
secure  control  of  local  policy.  It  is  too  early  to  predict  whether 
the  cities  in  which  the  street  railways  are  still  in  the  hands  of 
private  companies  will  be  able  to  withstand  the  temptations  which 
now  beset  them. 

Are  these  lessons  of  German  experience  of  any  real  value  to 
our  American  municipalities?  The  answer  to  this  question  is  a 
matter  of  far  more  than  theoretical  importance.  Partly  because 
of  the  feeling  of  irritation  aroused  by  the  corrupting  influence 
of  public  service  corporations  on  the  civic  life  of  American  com- 
munities, but  mainly  owing  to  a  general  awakening  to  the  possi- 
bihties  of  improved  service  in  urban  transportation  and  in  gas 
and  electric  light  service,  the  public  mind  is  anxiously  turning 
to  municipal  ownership  and  operation  as  a  possible  solution.  In 
fact,  indications  are  not  lacking  that  we  are  drifting  toward  a 
fetichism  of  municipal  operation  which  is  likely  to  work  great 
harm.  One  of  the  safeguards  against  this  danger  will  be  a  proper 
estimate  of  the  value  of  foreign  experience. 

The  success  of  municipal  operation  in  Germany  means  that  the 
people  are  enjoying  better  service  than  under  private  manage- 
ment.    The  causes  of  the  failure  of  private  operation  to  meet 


MUNICIPAL    OWNERSHIP  ,    79 

modern  requirements  are  readily  ascertainable,  and  as  we  have 
seen  these  causes  do  not  exist  in  the  United  States.  In  other 
words,  the  conditions  for  successful  private  management  are  far 
more  favorable  in  the  United  States  than  in  Germany. 

Furthermore,    as    regards    urban    transportation,    the    require- 
ments of  public  opinion  as  to  the   standard  of  service  are  im- 
measurably higher  in  the  United  States  than  in  Germany.     Not- 
withstanding our  prodigality  of  public  franchises,  the  American 
public  has  always  set  a  relatively  high  standard  as  regards  the 
character  of  the  transportation  service.     We  have  been  willing 
to  pay  a  high,  at  times  an  exorbitant  price,  but  there  has  been  a 
corresponding  demand  for  good  service.     No  American  commun- 
ity of  any  size  would  to-day  tolerate  the  conditions  of  urban  trans- 
it that  obtain  in  most  German  municipalities.     The  present  unrest 
of  American  public  opinion  is  due  to  the  fact  that  the  require- 
ments as  to  the  standard  of  service  are  being  raised  with  such 
rapidity  that  the  over-capitalized  corporations  are  unable  to  main- 
tain the  pace  to  which  they  have  been  forced  during  recent  years. 
Although  the  arguments  in  favor  of  municipal  operation  are 
being  grouped  about  the  possibility  of  large  financial  returns  to 
the  city  treasury,  it  is  not  likely  that  this  argument  will  stir  the 
American  people  to  any  drastic  measures.     To  secure  united  ac- 
tion, appeal  must  be  made  to  the  desire   for  improved  service. 
The  fact  that  municipal  operation  has  given  improved  service  in 
Germany  does  not  necessarily  mean  that  it  will  produce  the  same 
results   in   the   United    States.     Whatever   may   be    said    against 
American  street  railway  corporations,  no  one  will  deny  that  they 
have  given  far  better  service  than  the  German  companies.     It  is 
true  that  they  have  been  given  greater  freedom  in  the  develop- 
ment of  the  service  and  that  the  public  demands,  especially  as 
regards  rapidity  of  service,  have  been  considerably  higher  than 
in  Germany.     Be  this  as  it  may,  it  is  important  to  bear  in  mind 
that  municipal  operation  in  the  United  States  would  have  to  bear 
comparison  with  a  higher  standard  of  service  than  in  Germany. 
Any  attempt  to  apply  the  lessons  of  German  experience  which 
does  not  keep  these  differences  in  mind,  is  certain  to  be  mislead- 
ing rather  than  helpful. 


<So  SELECTED    ARTICLES 

Outlook.  80:  431-5.  June  17,  1905. 
Municipal   Ownership   of    Street   Railways    in   Glasgow. 

Robert  Donald. 

Glasgow,  the  commercial  metropolis  of  Scotland,  was  the  first 
city  to  adopt  municipal  ownership  of  street  railways  on  a  large 
scale  and  to  carry  it  to  a  logical  conclusion  by  operating  as  well 
as  owning  its  roads.  The  success  of  this  pioneer  enterprise  has 
stimulated  progress  all  over  the  world.  It  is  not  surprising  that 
Chicago  should  seek  the  advice  of  Mr.  Dalrymple,  the  manager 
of  the  Glasgow  Tramways,  when  about  to  make  the  first  experi- 
ment in  the  municipal  ownership  of  street  railways  in  America. 
The  chief  officers  of  the  Glasgow  Tramways  have  been  fre- 
quently called  in  to  advise  other  municipalities,  and  have  been 
tempted  away  to  occupy  other  positions.  When  Mr.  Yerkes 
wanted  a  man  to  direct  his  vast  railroad  enterprises  in  London — 
electric  suburban  roads  and  deep-level  subways — to  remodel  an 
old  system  and  inaugurate  a  new  one,  he  found  him  in  Mr.  John 
Young,  the  organizer  and  first  manager  of  the  Glasgow  Tram- 
ways. No  better  testimonial  to  the  efficiency  of  municipal  owner- 
ship could  be  found  than  this  appointment.  Glasgow  has  been 
a  training-ground  for  street  railway  administrators,  as  its  former 
officers  are  managing  tramway  systems  in  Leeds,  Madrid,  and 
other  cities. 

The  ownership  of  tramways  in  Glasgow  was  the  necessary 
outcome  of  the  city's  municipal  policy.  The  city  has  always  held 
a  leading  position  for  the  extent  of  its  municipal  institutions  as 
well  as  for  efficiency  of  management.  From  the  romantic  Lake 
Katrine  in  the  Trossachs,  associated  with  memories  of  Scott's 
masterpieces,  the  city  draws  its  municipal  water  supply.  Since 
1869  it  has  owned  its  gas-works,  and  lowered  the  price  until  now 
it  is  fifty-three  cents  per  thousand  cubic  feet.  Its  municipal 
electricity  is  also  supplied  at  the  extremely  low  rate  of  five  and 
one-half  cents  per  kilowatt  hour.  Private  slaughter-houses  were 
abolished  in  the  middle  of  the  last  century,  and  three  municipal 
establishments  serve  the  city.  All  the  markets  are  municipal  pos- 
sessions.    Forty  years  ago  the  center  of  Glasgow  was  congested 


MUNICIPAL   OWNERSHIP  8i 

and  overcrowded.  Dens  of  rookeries  were  packed  round  narrow 
courts.  They  were  nurseries  of  crime  breeding-grounds  of  dis- 
ease. A  radical  remedy  was  adopted.  Nearly  a  hundred  acres 
of  slumland,  with  a  population  of  51,000,  were  bought  by  the  city, 
which  carried  out  a  bold  reconstruction  and  rehousing  scheme. 
Over  $12,000,000  has  been  expended  in  the  improvement  scheme. 
The  municipality  has  built  thirty  new  streets,  widened  as  many 
more,  and  provided  new  tenements  and  lodging-houses  for  the 
displaced  population.  It  burdened  itself  with  a  heavy  annual 
charge  to  start  with  in  support  of  the  improvement ;  but  the 
scheme,  instead  of  now  being  a  burden,  has  become  a  financial  as 
well  as  a  social  benefit  to  the  community.  It  was  the  persistency 
of  Glasgow  that  broke  down  the  private  telephone  monopoly  in 
Great  Britain,  encouraged  other  municipalities  to  establish  their 
own  system,  and  has  now  led  to  the  complete  nationalization  of 
the  whole  service. 

Among  the  other  municipal  possessions  of  Glasgow  may  be 
mentioned  a  series  of  hospitals,  homes  for  inebriates,  art  galleries, 
museums,  numerous  parks,  libraries,  baths,  winter  gardens, 
botanic  gardens,  public  schools,  art  schools,  technical  institutes, 
free  concerts,  pleasure  grounds,  facilities  for  golf  and  other 
games,  gymnasia  and  playgrounds  for  children,  etc.  Its  solicitude 
for  the  poor  has  induced  it  to  establish  a  family  home  for  chil- 
dren of  widows  and  widowers,  and  depots  for  the  supply  of 
sterilized  milk  to  poor  children.  It  was  due  to  civic  enterprise 
that  the  Clyde  was  converted  into  a  navigable  river  and  Glasgow 
made  one  of  the  leading  ports  in  the  world. 

Connected  with  Glasgow's  greater  municipal  organizations  are 
many  subsidiary  developments  of  special  interest.  The  Cleansing 
Department,  for  instance,  which  deals  with  city  refuse,  has  de- 
veloped large  estates,  maintains  farms,  and  works  stone  quarries, 
from  which  the  municipality  obtains  part  of  its  supply  for  street 
paving.  The  Water  Department  supplies  hydraulic  power.  In 
fact,  Glasgow  municipality  looks  after  the  welfare  of  its  citizens 
on  a  most  comprehensive  scale,  by  providing  them  with  all  com- 
mon services  of  public  utility — with  one  exception.  Having  done 
so  much  to  promote  the  health  and  welfare  of  the  community,  it 
has  not  considered  it  necessary  to  make  provision  for  the  disposal 


82  SELECTED    ARTICLES 

of  the  dead,  by  municipalizing  the  cemeteries.  All  its  numerous 
services,  institutions,  works,  municipal  industries,  are  carried  on, 
not  for  the  purpose  of  accumulating  large  profits  to  be  trans- 
ferred to  accounts  for  the  relief  of  local  taxation,  but  on  the 
principle  of  supplying  the  cheapest  and  best  services,  so  as  to 
spread  the  benefits  over  the  greatest  number  of  the  citizens.  The 
dividends  which  the  city  reaps  are  in  the  form  of  civic  betterment, 
lower  death  rate,  and  improvement  in  social  conditions.  Its 
progress  in  civic  affairs  has  never  been  tarnished  by  the  taint  of 
politics.  The  ward  "boss"  is  unknown.  Citizens'  committees 
take  his  place.  Civic  patriotism  runs  strong,  and  the  differences 
among  the  members  of  the  City  Council  are  not  so  much  on  the 
principles  of  progress  as  on  the  pace  at  which  they  should  go  for- 
ward. 

Bearing  in  mind  the  history  of  Glasgow,  its  experience  in 
municipal  administration,  it  was  the  most  natural  thing  in  the 
world  that,  given  the  opportunity,  it  should  municipalize  its  tram- 
ways ;  and  it  would  have  been  going  back  on  its  record  if  it  had 
not  made  the  system  a  success.  Like  most  British  cities  outside 
London,  Glasgow  had  always  municipal  ownership  of  its  tram- 
ways. Several  years  after  tramways  were  introduced  into  Ameri- 
can cities,  experimental  lines  were  tried  in  England.  Parliament 
scented  the  nucleus  of  a  new  monopoly.  Cities  feared  that  they 
would  lose  control  of  their  streets ;  so  a  law  was  passed,  though 
not  until  1871,  laying  down  the  principles  of  municipal  ownership, 
with  short  franchises — an  undesirable  condition,  as  time  showed. 
The  cities  could  build  the  roads  and  grant  franchises  to  com- 
panies for  twenty-one  years,  or  could  leave  the  companies  the 
right  to  build,  with  or  without  conditions.  In  either  case,  the 
tenure  of  the  private  corporations  expired  automatically  after  the 
lapse  of  twenty-one  years  from  the  opening  of  the  track.  At  that 
time  the  House  of  Commons  foresaw,  the  possibility  of  municipal 
operation,  but  was  fearful  of  the  result,  and  passed  a  Standing 
Order,  to  prevent  it.  The  city  which  owned  the  roads  was  under 
no  obligation  to  buy  the  operating  company's  rolling  stock, 
depots,  etc.,  but  the  city  which  did  not  begin  with  municipal  own- 
ership was  called  upon  to  buy  the  company's  undertaking  at  its 
"then  value ;"  that  is,  after  twenty-one  years'  use,  making  allow- 


MUNICIPAL   OWNERSHIP  83 

ance  for  depreciation  but  none  for  compensation  in  respect  of 
good  will  and  future  profits.  Both  methods  undoubtedly  retarded 
progress.  When  the  franchise  period  was  drawing  to  a  close, 
there  was  no  desire  for  improvement,  no  attempt  to  introduce 
electric  traction ;  roads  were  not  extended ;  rolling  stock  was 
allowed  to  become  dilapidated  as  well  as  obsolete. 

The  legislative  barrier  to  prevent  municipal  operation  was 
not  disposed  of  until  1896.  Several  towns,  notably  Huddersfield 
and  Plymouth,  had  before  that  date  operated  lines  only  on  suffer- 
ance, because  no  company  had  made  a  reasonable  offer.  Glasgow 
discovered  that,  in  taking  over  the  powers  which  established  the 
company,  it  had  also  taken  the  right  to  work  the  tramways,  so 
that  it  was  outside  the  scope  of  the  Parliamentary  prohibition. 

It  had  given  a  company  the  franchise  for  twenty-three  years — 
two  years  beyond  the  minimum  period — on  the  following  condi- 
tions : 

1.  The  company  paid  all  promoting  expenses  and  interest  on 
the  money  which  the  city  borrowed  in  making  the  roads. 

2.  It  paid  into  a  redemption  fund  three  per  cent,  on  the 
capital  expenditure. 

3.  It  paid  four  per  cent,  on  the  cost  of  construction  to  form 
a  fund  for  renewals  carried  out  by  itself  under  supervision  of 
the  municipality. 

4.  It  paid  $750  per  mile  for  the  use  of  the  streets. 

These  were  stringent  conditions,  but  they  did  not  preverft  the 
tramway  company  from  paying  fair  dividends,  and  they  enabled 
the  city  to  pay  back  the  whole  of  the  capital  expenditure  when 
the  franchise  expired,  and  to  receive  in  the  form  of  mileage  dues 
$378,120. 

The  franchise  expired  in  June,  1894.  The  situation  was  sim- 
ilar to  the  position  in  Chicago.  War  was  declared  between  the 
company  interests  and  the  municipality.  Municipal  elections  were 
fought  on  the  future  of  the  tramways.  A  spontaneous  outburst 
of  civic  enthusiasm  led  to  a  citizens'  victory ;  municipal  ownership 
was  adopted.  Defeated  in  the  election  field,  the  company  inter- 
ests then  declined  to  sell  their  worn-out  cars,  their  old  horses, 
and  their  depots  at  a  reasonable  price.  The  city's  reply  was  to 
build  new  depots,  buy  new  cars,  engage  and  train  a  new  staff. 


84  SELECTED    ARTICLES 

Without  the  use  of  the  track  it  could  not  adopt  electricity,  but 
had  to  begin  with  horse  traction.  There  was  a  dramatic  change. 
At  midnight  the  company's  cars  disappeared  from  the  streets ; 
a  few  hours  later  the  municipal  cars  were  running.  The  success 
was  immediate  and  has  been  permanent. 

It  will  be  interesting  to  state  the  effect  of  municipal  owner- 
ship, and  to  explain  the  policy  which  guided  the  City  Council. 
The  company — as  all  private  enterprise  must  do — kept  mainly  in 
view  immediate  profits.  Like  most  British  companies,  it  pur- 
sued a  narrow  policy.  The  keynote  of  the  municipal  system  was 
service,  giving  the  best  possible  to  the  citizens.  The  municipality 
operated  the  roads  in  the  interest  of  all.  It  greatly  lowered  the 
fares,  banished  all  advertisements  from  the  cars,  made  the  names 
of  the  routes  and  destinations  conspicious,  opened  up  new  routes 
and  linked  up  new  districts.  It  also  considered  its  employees. 
Without  a  contented  staff  there  cannot  be  a  perfect  service.  So 
the  drivers  and  conductors  were  dressed  in  new  uniforms,  their 
wages  were  increased,  their  hours  reduced.  The  citizens  had  the 
feeling  of  personal  possession  when  they  patronized  the  cars, 
which  display  the  city's  arms  and  its  motto — "Let  Glasgow 
Flourish."  Civic  patriotism  asserted  itself  later  on,  when  the 
displaced  franchise-holders  started  a  competing  service  of  omni- 
buses, which  failed  to  get  support  and  soon  disappeared. 

The  City  Corporation  had  no  sooner  completed  its  horse-car 
service  than  it  set  about  investigating  electric  traction.  It  sent 
deputations  to  America  and  to  Continental  Europe.  To  the  dis- 
appointment of  many,  it  adopted  the  overhead  instead  of  the 
underground  trolley. 

In  reconsfriicting  its  system,  the  City  Corporation  adopted  the 
system  carried  out  in  other  departments.  It  dispensed  with  con- 
tractors as  much  as  possible.  It  built  the  new  depots  and  the  elec- 
tricity-generating station,  laid  down  the  extensions,  and,  after 
the  first  set  of  cars,  built  all  others  in  the  department's  work- 
shops. The  Glasgow  tramways  extend  beyond  the  city  boundaries 
by  agreement  with  suburban  municipalities,  and  serve  a  popula- 
tion of  a  million.  Since  the  tramways  were  municipalized,  the 
roads  have  increased  from  sixty-four  to  one  hundred  and  fifty 
miles.     This  extent  of  road  is  small  in  comparison  with  the  Chi- 


MUNICIPAL    OWNERSHIP  85 

cago  street  railways,  or  of  the  systems  in  less  populous  American 
cities.  The  area  of  Glasgow  is  small — 12,688  acres — for  a  city 
of  its  population,  790,000.  Many  streets  are  too  narrow  for  tram- 
ways. Suburban  districts  still  maintain  a  lingering  but  dying 
prejudice  against  the  democratic  street-car.  Glasgow  is  a  busy 
center  for  a  British  city,. but  its  bustle  cannot  be  compared  with 
the  feverish  activity  of  Chicago.  There  is  far  greater  mobility 
among  the  people  in  American  than  in  British  cities. 

There  are  interesting  differences  in  the  methods  of  operating 
the  car  service.  There  are  no  transfers  in  Glasgow,  as  in  Ameri- 
can and  Continental  cities.  The  city  is  divided  into  routes,  and 
fares  are  regulated  according  to  distance.  The  policy  is  to  carry 
the  greatest  possible  number  of  people  at  the  lowest  possible 
rate,  and  to  make  every  route  independent  and  self-supporting, 
except  in  the  case  of  new  roads  which  are  being  developed. 
British  people  have  not  yet  acquired  the  traveling  habit  to  the 
same  extent  as  Americans.  A  larger  number  of  people  want  to 
travel  a  mile  than  to  go  five  miles ;  but,  unless  the  fares  were  low 
for  short  distances,  British  people  would  not  take  the  cars. 

The  fares  in  Glasgow  are  one  cent  for  a  stage  of  a  little  over 
half  a  mile,  and  over  30  per  cent,  of  the  passengers  travel  this 
short  distance,  and  bring  in  nearly  17  per  cent,  of  the  receipts. 
For  an  average  of  two  and  a  third  miles  the  fares  are  two  cents, 
and  close  on  61  per  cent,  of  the  passengers  travel  this  distance 
and  contribute  665<2  per  cent,  of  the  receipts,  so  that  91  per  cent, 
of  the  total  number  carried  pay  two-cent  or  one-cent  fares.  Only 
6.31  per  cent,  travel  for  three  cents,  bringing  10.38  per  cent,  of 
the  receipts;  1.62  pay  four  cents,  and  bring  3.54  per  cent,  of  the 
receipts.  Less  than  one  per  cent,  of  the  189,000,000  passengers 
last  year  paid  five  cents  or  more.  It  is  obvious  that  the  long-dis- 
tance passengers  contribute  an  undue  share  of  the  profits,  while 
in  American  cities  the  policy  is  to  overcharge  the  short-distance 
traveler, 

Glasgow  tramways  differ  in  other  respects  from  the  American 
cars.  The  conductor,  instead  of  ringing  up  the  fare,  gives  pas- 
sengers tickets  which  they  punch,  and  the  discs  punched  out  of 
the  tickets  are  the  means  of  checking  the  receipts.  Then  the  cars 
are  double-deckers.    Leaving  out  of  account  overcrowding,  which 


86  SELECTED   ARTICLES 

is  not  permitted  in  Glasgow,  the  double-decker  will  carry  nearly 
double  the  number  of  passengers  of  the  ordinary  American  car. 
Stoppages  are  more  frequent,  however,  and  fares  are  more  diffi- 
cult to  collect.  There  are  regular  stopping  places,  about  the 
width  of  a  block  apart,  for  taking  up  and  setting  down  passengers. 

The  Glasgow  tramways  are  managed  by  a  Committee  of  the 
City  Corporation,  which  holds  frequent  meetings  and  reports 
regularly  to  the  City  Council.  It  consists  of  twenty-eight  mem- 
bers, who  appoint  sub-committees  for  supervising  different  de- 
partments. It  obtains  the  sanction  of  the  Council  for  its  actions. 
The  Council  might  be  regarded  as  the  legislative  authority,  and 
the  Committee  as  the  executive. 

From  a  financial  point  of  view  the  Glasgow  undertaking  has 
been  remarkably  successful.  A  cautious  policy  has  been  adopted. 
As  I  have  pointed  out,  the  original  capital  for  constructing  the 
roads  was  paid  off  when  the  municipality  obtained  possession. 
More  capital  was  borrowed,  on  the  credit  of  the  city,  to  start  the 
horse  traction  system,  and  the  city  has  been  continually  borrowing 
to  meet  additional  capital  expenditure,  until  the  capital  now 
stands  at  over  $12,000,000.  The  Council  pays  a  little  over  three 
per  cent,  interest  on  the  capital,  which  is  borrowed  for  a  period 
of  thirty  years.  It  has  adopted  the  policy  of  practically  renewing 
the  permanent  way  out  of  revenue,  depreciating  heavily,  and 
building  up  revenues  in  order  to  keep  down  capital  expenditure. 
Unlike  other  British  cities.  Glasgow  does  not  use  its  surplus 
profits  for  the  relief  of  local  taxation.  It  pays  a  mileage  rate  on 
the  same  basis  as  the  old  company  did  into  what  is  known  as  the 
Common  Good  Fund  of  the  City — a  general  fund  which  can  be 
applied  to  any  purpose  for  increasing  the  amenities  of  the  city 
and  the  welfare  of  the  people.  This  mileage  rate  amounts  to 
$125,000  a  year.  The  result  of  pursuing  this  cautious  policy  as  to 
capital  expenditure,  and  carrying  out  repairs  and  renewals  from 
revenue,  was  that,  by  the  time  the  whole  system  was  converted 
to  electric  traction,  the  whole  capital  incurred  four  or  five  years 
previously  for  equipping  the  horse  system  had  been  entirely  ex- 
tinguished. 

Last  year's  accounts  indicate  the  healthy  financial  condition 
of  the  tramways.     The  total  receipts,  for  instance,  amounted  to 


MUNICIPAL   OWNERSHIP  87 

£724,857  ($3,624,255),  the  operating  expenses  to  £356,820 
($1,684,100) — 49  per  cent,  of  the  revenue.  The  net  receipts 
showed  a  gross  return  on  the  capital  outlay  of  17.46  per  cent. 
The  interest  and  franchise  charges  to  other  municipalities 
amounted  to  £64,376  ($321,880).  The  payment  into  a  sinking 
fund  for  redemption  of  capital  at  the  rate  of  two  per  cent,  was 
^45.553  ($227,765).  There  still  remained  the  huge  surplus  of 
£258,102  ($1,290,510),  which  was  allocated  to  depreciation  and 
reserve  fund,  and  the  payment  of  $125,000  in  mileage  dues  to  the 
Common  Good  Fund.  The  ordinary  depreciation  on  equipment, 
power  stations,  cars,  etc.,  amounted  to  $393,095.  There  was  a 
special  depreciation  for  cables,  overhead  wires,  buildings,  etc., 
of  $310,000.  There  was  carried  to  a  general  reserve  fund  $93,950, 
and  to  a  permanent  way  renewal  fund  $300,135.  This  fund  now 
stands  at  $965,025.  The  tramways  undertaking  makes  the  same 
contribution  to  local  taxation  as  if  it  were  under  private  enter- 
prise. The  amount  which  it  paid  in  taxes  in  the  last  financial 
year  was  $174,580.  The  accounts  of  the  department  are  examined 
and  audited  by  independent  professional  accountants.  The  ac- 
counts are  published  with  elaborate  detail,  showing  the  smallest 
item  of  expenditure  worked  out  to  percentages  and  comparisons 
with   previous  years. 

The  Tramway  Department,  as  I  have  indicated,  generates 
its  own  electric  power,  the  total  cost  of  which  is  less  than  one 
cent  per  kilowatt  hour. 

The  Tramways  Committee  delegates  considerable  power  to  its 
general  manager,  who  is  responsible  for  the  staff  who  form  part 
of  the  permanent  civil  service  in  the  city.  Politics  does  not  in- 
fluence appointments,  and  promotion  is  by  merit. 

In  conclusion,  I  would  like  to  point  out  that  the  Glasgow  tram- 
ways system  has  not  by  any  means  reached  its  high-water  mark 
of  efficiency.  With  its  cautious  financial  policy,  the  Tramways 
Department  could  in  a  few  years  accumulate  reserves  which 
would  enable  it  to  introduce  the  underground  trolley  without 
adding  greatly  to  its  capital,  and  further  swell  its  earning  powers. 
With  liberal  depreciation  and  reserve  funds  to  meet  renewals 
and  obsolescence,  with  a  redemption  fund  which  liquidates  the 
original  capital  of  the  undertaking  in  thirty  years,  which  is  at  the 


88  SELECTED    ARTICLES 

same  time  maintained  in  an  efficient  condition  out  of  revenue,  the 
City  Corporation  is  more  than  doing  its  duty  to  the  next  genera- 
tion. Lower  fares  for  long  distances  should  be  easily  possible 
in  the  near  future,  and  there  is  a  prospect  that  the  average  fare 
will  come  down  to  one  cent.  A  universal  one-cent  fare  ir- 
respective of  distance  could  then  be  adopted. 


City  Hall.   2:  225-7.  January,   1910. 

Argument    for    the    Municipal    Ownership    of    a    Street "  Railway 

Company. 

Nearly  all  the  arguments  commonly  advanced  by  persons 
urging  the  operation  of  street  railway  companies  by  the  municipal 
government  are  contained  in  the  minority  report  of  a  sub-com- 
mittee of  a  citizens'  committee  of  Detroit,  ]\Iich.,  filed  in  De- 
cember. Detroit  being  a  typical  American  city,  the  application  of 
the  ideas  of  the  municipal  ownership  enthusiasts  in  this  instance 
is  of  great  interest  to  all  those  who  are  impartially  studying  the 
question,  and  THE  CLfY  HALL  prints  the  report  practically  in 
full,  following  the  outline  chosen  by  the  sub-committee : 

1.  Is  municipal  ownership  financially  practicable? 

2.  Can  it  be  made  economically  possible? 

3.  Is  it  morally  right? 

4.  Can  it  free  us  from  political  corruption? 
Is  it  the  best  as  well  as  the  only  reasonable  and  feasible 


5 
plan? 


Is  it  Financially   Practicable f 


"Our  investigation  shows  that  a  municipally  owned  and  op- 
erated street  railway  system  cannot  financially  fail  in  this  city 
for  the  reason  that  it  will  always  be  within  the  power  of  the  city 
to  make  the  expenses  of  transportation  cover  the  cost  of  opera- 
tion, just  as  we  do  now  with  our  water  works  and  other  munici- 
pal institutions.  Just  what  the  cost  per  passenger  would  actually 
be  it  has  not  been  possible  for  us  to  exactly  figure  out.  But  this 
is  plain :  with  municipally  owned  lines,  based  upon  the  actual  cost 
of  construction  and  operation,  we  can  greatly  reduce  the  present 


MUNICIPAL    OWNERSHIP  89 

rate  of  fare.  This  is  self-evident  when  we  consider  the  condi- 
tions of  the  old  company  and  their  expenses.  It  is  burdened 
with  a  debt  much  greater  than  the  actual  valuation  of  the  property. 
If  we  consult  the  company's  own  reports,  we  can  see  what  an 
enormous  reduction  could  be  made  in  the  way  of  reduced  fares 
if  the  lines  were  owned  and  operated  by  the  municipality. 

"The  Detroit  United  Railway,  in  its  report  to  the  American 
Street  Railway  Investment  for  the  year  ending  December  31, 
1908,  states  that  it  operated  in  the  city  of  Detroit,  during  that 
year,  23,977,814  car  miles,  that  its  earnings  per  car  mile  for  each 
mile  operated  were  23.05,  or  a  fraction  over  23  cents  per  mile. 
It  states  that  its  net  earnings,  after  paying  taxes  and  all  legiti- 
mate operating  expenses,  were  8.53,  or  a  fraction  over  Syz  cents 
on  each  and  every  car  mile  so  operated.  This,  taking  its  own  fig- 
ures, left  it  a  net  profit,  after  paying  all  legitimate  operating 
expenses  and  taxes,  over  the  sum  of  $2,045,000.  This  gives  us 
some  idea  as  to  what  can  be  done  in  the  way  of  lowering  the 
fares  if  the  system  is  operated  by  the  municipality  in  the  interest 
of  the  people. 

"The  money  to  finance  such  a  proposition  can  easily  be  raised. 
Controller  Doremus  proved  this  only  a  few  evenings  ago  in  a 
public  address.  If  you  were  to  grant  the  present  company  a 
franchise  for  30  years,  based  upon  6  or  7  tickets  for  a  quarter, 
the  directors  would  go  into  the  money  market  and  borrow  millions 
with  nothing  back  of  it  but  the  franchise.  Has  not  the  city  this 
same  opportunity?  We  not  alone  have  the  franchise,  but  we  have 
the  property  on  which  to  issue  these  bonds.  The  bonds  will  al- 
ways be  secure.  Money  can  be  borrowed  by  the  city  at  a  lower 
rate  than  by  the  D.  U.  R.  There  will  never  be  any  danger  of  a 
foreclosure,  for  the  city  has  within  itself  the  power  to  regulate 
the  fares  to  meet  the  liabilities  that  may  from  time  to  time  occur. 
Therefore,  there  can  be  no  more  chance  of  the  system  failing  un- 
der municipal  ownership  and  operation  than  there  is  for  the  city 
of  Detroit  to  disband  its  municipal  organization. 

Can  It  be  Made  Economically  Possible f 

"To  say  that  a  municipality  cannot  operate  its  street  railway  as 
economically  as  a  private  company  is  to  declare  the  judgment  of 


90  SELECTED    ARTICLES 

the  400,000  people  of  Detroit  unequal  to  the  wisdom  and  judgment 
of  the  6  or  7  foreign  directors  of  a  private  company.  Can  not  the 
city  hire  men  of  brains?  Can  it  not  hire  the  same  experts  and 
the  same  men  with  equal  skill  to  operate  the  cars  that  the  present 
company  employs?  Most  assuredly  it  can,  and  it  will.  There  is 
no  great  mystery  or  hidden  secret  about  the  successful  operation 
of  a  street  railway.  There  are  not  even  the  complications  to 
contend  with  that  surround  the  average  business  concern.  The 
street  railway  does  a  cash  business.  It  receives  its  money  in  ad- 
vance. In  this  way  it  has  the  advantage  even  over  our  other  public 
utilities.  The  expenses  per  car  mile  are  easily  figured,  and  the 
rate  or  rates  of  fare  to  make  it  successful  are  also  easily  estab- 
lished. 

"Great  Britain  alone  has  close  to  2,000  municipal  undertakings. 
The  incomes  from  these  enterprises  total  each  year  in  round 
numbers,  $150,000,000,  and,  as  stated  by  Prof.  Frederic  C.  Howe, 
who  made  a  critical  examination  of  the  conditions  of  these  enter- 
prises for  the  National  Bureau  of  Commerce  and  Labor  at  Wash- 
ington, it  is  equivalent  to  22%  per  cent  of  the  total  revenues 
collected  from  all  sources  in  England  and  Wales,  and  to  39  per 
cent  of  the  total  revenues  of  Scotland. 

"One  hundred  and  forty-two  of  these  municipal  undertakings 
are  street  railway  systems,  and  Mr.  Howe  adds  that  the  gross 
profits  to  the  municipalities  from  this  source  is  close  to  $10,000,- 
000  a  year,  besides  a  generous  amount  paid  in  taxes.  The  capital 
used  in  the  street  railway  enterprises  is  about  $200,000,000,  all 
raised  on  the  faith  of  the  public  in  these  undertakings,  and  there 
has  yet  to  be  an  instance  in  which  those  loaning  money  to 
municipalities  for  this  purpose  have  lost  a  single  cent.  Many 
of  these  enterprises  are  not  run  to  make  money,  however ;  they 
are  run  to  give  the  cities  service  at  cost,  or  as  near  cost  as  is  safe. 

Js  It  Morally  Right? 

"There  are  some  who  contend  that  it  is  not  morally  right  for 
the  city  to  enter  into  a  business  that  can  be  conducted  by  private 
individuals.  It  is  always  morally  right  to  protect  our  interests, 
either  individually  or  collectively.  It  is  not  only  a  moral  right  to 
protect  ourselves   from  monopolies,  but  it  is  a  legal   right,  and 


MUNICIPAL   OWNERSHIP  gr 

therefore  becomes  a  personal  duty.  As  to  the  operation  of  street 
railways  in  a  municipality,  it  is  not  a  competitive  industry.  The 
history  of  the  entire  world  demonstrates  this  fact.  It  is  yet 
fresh  within  our  memory  how  ex-Maj'or  Pingree  encouraged  the 
Detroit  Electric  Railway,  known  as  the  three-cent  line,  with  the 
understanding  that  it  would  be  a  competitor,  competing  with  the 
other  roads  within  the  city;  but  how  long  did  that  competition 
last?  A  consolidation  soon  took  place,  and  the  roads  were  owned 
and  operated  by  one  company  and  it  has  held  an  absolute 
monopoly  over  the  city.  Thus  the  question  naturally  comes  as 
to  whether  it  is  morally  right  to  protect  ourselves  against  this 
condition,  and  the  effect  of  this  combination  upon  our  civic  life. 
The  fundamental  test  of  any  institution,  method  or  service  must 
be  its  effect  upon  the  public  good,  its  relation  to  morals,  manhood, 
government,  civilization  and  progress,  as  w^ell  as  its  financial 
side.  In  applying  the  vital  test,  the  principal  emphasis  must  not 
be  placed  alone  upon  the  financial  results,  but  the  human  results 
must  be  considered  as  well.  The  character  products  and  the 
social  products  of  our  institutions  are  of  as  great,  if  not  greater, 
moment   than   the   money   products. 

"There  is  too  much  interest,  too  much  affecting  society  and 
its  future  welfare  to  trust  and  place  these  street  railroads  again 
in  the  hands  of  private  parties,  whose  only  object  and  aim  is  to 
secure  the  almighty  dollar.  In  order  to  establish  the  proper 
standard  of  morality  in  civic  life  it  is  necessary  that  the  munic- 
ipality own  and  operate  its  own  street  railways,  give  service  at 
cost,  and  eliminate  the  element  of  allowing  a  private  company 
to  do  the  public's  business  for  profit. 

Can  It  be  Free  From  Political  Corruption? 

"In  considering  the  political  question  as  it  affects  this  problem, 
let  us  be  absolutely  honest  and  sincere.  Is  it  not  bad  politics  to 
urge  us  to  commit  municipal  functions  to  private  control?  Is 
there  not  ten  times  more  bad  politics  in  private  than  there  is  in 
municipal  control?  There  is  less  opportunity  for  bad  politics  in 
municipal  control  than  there  is  in  private  control.  There  is  less 
incentive  for  the  city  to  employ  those  of  bad  politics  than  there  is 
for  a  corporation  to  employ  those  of  bad  politics.   Where  have  bad 


92  SELECTED  ARTICLES 

politics  been  discovered?  Who  have  been  responsible  for  its  em- 
ployment? Where  bribery  and  treachery  in  municipal  affairs  have 
come  to  light,  who  have  been  the  guilty  ones?  Were  they  among 
those  endeavoring  to  retain  to  their  municipalities  their  full  func- 
tions and  rights,  or  were  they  those  who  resisted  and  sought  to  de- 
feat municipal  ownership  and  the  city's  rights?  An  honest  answer 
to  each  of  these  questions  is  in  favor  of  the  municipal  ownership 
of  pubHc  utilities.  Once  these  utilities  are  municipalized  and  in  the 
hands  of  the  people,  the  cause  for  bribery  and  political  corruption 
will  disappear.  An  investigation  of  the  institutions  even  of  our 
own  city  that  are  now  in  the  hands  of  the  municipality  shows  that 
the  political  corruption  surrounding  these  institutions  has  been 
lessened — yes,  almost  destroyed. 

Is  It  the  Best  as  Well  as  the  Only  Feasible  Way? 

"Let  the  municipality  arrange  so  that  the  people  can  elect  or 
select  an  honest  commission  of  five  members  free  from  any 
partisan  or  political  interference.  Let  the  commission  be  the 
choice  of  the  citizens  of  this  city,  and  place  in  their  hands  the 
complete  management  and  direction  of  the  street  railways.  Pay 
each  member  an  adequate  salary,  and  let  each  be  subject  to  recall 
by  popular  election  on  petition  of  25  per  cent  of  the  electorates. 
There  is  no  question  but  what  you  will  then  see  graft  absolutely 
removed  and  the  city  free  from  much  of  the  corruption  that  has 
come  from  these  sources  of  corruption  and  that  have  menaced  our 
civic  life  in  the  past. 

"To  establish  the  conditions  for  which  we  were  told  this  com- 
mittee was  appointed,  municipal  ownership  is  the  only  way  in 
which  it  can  be  done.  The  history  of  private  corporations  the 
world  over  has  but  one  page.  They  are  operated  in  the  financial 
interest  of  the  few,  with  little  consideration  for  the  people,  either 
for  those  who  are  patrons  or  for  those  who  operate  the  cars  and 
do  the  work.  Their  private  interests  are  paramount  and  must  be 
first  served.  Investigation  throughout  all  the  world  shows  that 
the  municipalities  everywhere  are  taking  over  these  institutions. 
Water  works  were  first  taken  over  because  water  is  closely  re- 
lated to  the  health  of  the  comimunity.  Then  came  gas  and  elec- 
tricity.     Next    comes    the    operation    of    street    railways,    and 


MUNICIPAL  OWNERSHIP  93 

wherever  the}-  have  been  taken  over,  they  have  been  a  success, 
all  things  considered.  The  results  have  been  higher  wages  and 
shorter  hours  to  the  employes,  and  better  service  and  lower  rates 
of  fare  to  the  people.  There  is  no  question  but  what  municipal 
operation  of  street  cars  is  the  best  and  most  feasible  way  offering 
itself  to  Detroit  at  this  time. 

"Nor  is  there  any  menace  to  the  community  in  increasing  the 
number  of  city's  servants  through  the  operation  of  profitable 
enterprises.  Detroit  today  has  between  3,500  and  5,000  employes, 
and  the  number  can  easily  be  increased  by  2,500  to  3,000  without 
any  danger.  Glasgow  has  15,000  city  employes,  or  10  per  cent  of 
its  voting  population.  Altogether  British  cities  employ  between 
150,000  and  200,000  men.  Yet  in  no  instance  is  it  claimed  that 
this  political  power  is  manipulated  in  favor  of  any  political 
organization.  But  when  public  service  corporations  are  privately 
owned,  the  contrary  is  the  fact.  Pressure  is  always  brought  to 
bear  on  employes  of  private  corporations  doing  public  business  to 
vote  as  their  employers  desire  them  to,  regardless  of  their  own  per- 
sonal preferences,  or  of  the  effect  it  may  have  on  public  interests. 

Recommendations  to  the  Comtnon  Council. 

"We  therefore   recommend  to  the  common  council : 

"First.  That  they  grant  no  more  franchises  for  the  purpose 
of  operating  privately  owned  street  railways  to  any  person, 
corporation  or  company. 

"Second.  That  the  council  make  arrangements  to  at  once 
inaugurate  and  establish  a  thorough  system  of  municipality  owned 
street  railways  covering  the  entire  city. 

"In  order  to  establish  and  properly  operate  such  a  system,  we 
recommend  that  they  first  arrange  and  have  elected  by  a  special 
election  a  non-partisan  commission  who  shall  have  the  direction 
and  control  of  the  inaugurating  and  the  operation  of  the  munici- 
pally owned  street  railways.  We  advise  that  in  establishing  the 
roads  they  first  take  over  such  streets  and  lines  on  which  the 
present  franchises  have  expired,  and  that  then  the  commission 
shall  make  arrangements  for  the  purchase  from  the  old  com- 
panies,  at  actual  physical   value,   such   lines   as  these  companies 


94  SELECTED    ARTICLES 

still  retain  the  franchises  on,  providing  the  company  will  dispose 
of  them  to  the  municipality  at  actual  physical  value. 

"In  case  of  refusal,  the  commission  shall  proceed  to  establish 
lines  that  vi^ill  give  the  people  a  complete  service,  and,  if  neces- 
sary, parallel  such  lines  as  have  franchises,  or  by  placing  tempo- 
rary tracks  in  and  upon  the  same  streets  if  necessary-,  until  the 
entire  city  is  completely  covered  by  such  municipally  owned  and 
operated  street  car  system. 

"To  adopt  any  other  method  than  municipal  ownership  to 
settle  for  once  and  all  the  problem  of  street  car  transportation 
at  cost,  is  to  continue  the  friction  and  wrangling  between  the 
city  and  the  corporation  during  the  life  of  any  franchise  that  may 
be  given.  A  municipality  of  400,000  people  never  yet  had  the 
wisdom  to  legislate  most  wisely  for  a  municipality  which  will 
soon  have  a  population  of  a  million.  Human  intelligence  is  too 
finite  to  know  what  will  be  the  cost  of  transportation  when  a  few 
more  miles  of  trackage  is  going  to  accommodate  twice  the  present 
traffic,  with  only  a  small  percentage  increase  in  the  cost  of  doing 
the  service. 

"To  the  time-tried  axiom  of  a  'corporation  has  no  soul,'  and 
particularly  a  corporation  with  a  franchise  from  a  populous  city, 
may  be  added  another,  'Privilege  knows  no  honor.'  A  corpora- 
tion with  a  franchise  can  invent  a  hundred  ways  to  squeeze  profits 
from  the  public  through  unsatisfactory  and  inadequate  service, 
low  wages  and  long  hours  for  employes  and  high  fares.  No  great 
city  will  seriously  blunder  so  long  as  it  keeps  control  of  all  its 
public  utilities.  And  only  in  this  way  can  cost  and  service  be 
harmonized." 

North  American   Review.   172:   445-55.   March,   1901. 

Municipal  Ownership  of  Natural  Monopolies.     Richard  T.  Ely. 

The  question  under  discussion  relates  to  the  ownership  and 
management  of  those  local  businesses  which  furnish  what  are 
called  public  utilities.  The  principal  classes  of  these  public  util- 
ities are  water,  light  and  transportation.  They  are  called  monop- 
olies because,  as  we  know  from  experience,  we  cannot  have  in 
their  case  effective  and  permanent  competition. 


MUNICIPAL   OWNERSHIP  95 

It  is  often  said  that  we  do  not  want  to  decide  the  question  of 
municipal  ownership  in  accordance  with  general  principles,  but 
that  each  case  should  be  decided  as  it  arises.  If  New  York  City 
desires  public  ownership  of  water-works,  it  is  urged,  let  New 
York  City  by  all  means  try  the  experiment.  But  let  New  Haven, 
if  the  people  of  that  city  so  desire,  continue  private  ownership  of 
water-works.  Still  others  say,  let  us  adhere  to  private  ownership 
until  we  find  that  we  have  made  a  serious  mistake  in  so  doing. 
Both  these  attitudes  imply  the  renunciation  of  science,  or  a  denial 
of  the  possibility  of  a  scientific  solution  of  the  problem.  Imagine 
such  an  attitude  in  engineering  as  applied,  let  us  say,  to  bridge- 
building.  The  result  would  surely  be  disaster.  The  outcome  of 
this  attitude  in  what  we  may  call  applied  economics  or  social 
engineering  has  likewise  been  disastrous.  ^Mistakes  have  been 
made  which  it  has  not  been  possible  to  correct,  or  which  have 
been  corrected  with  great  loss.  The  private  ownership  of  water- 
works in  London,  which  still  persists,  although  recognized  to  be 
an  evil  many  years  ago,  affords  an  illustration.  If  at  length  this 
evil  is  corrected,  it  v^rill  cost  the  taxpayers  many  millions  of  dol- 
lars which  might  have  been  saved.  Innumerable  illustrations 
could  be  afforded,  did  space  permit.  What  must  be  desired  by 
any  one  who  has  an  appreciation  of  the  nature  of  modern  science, 
is  the  establishment  of  general  principles  whereby  mistakes  may 
be  avoided  and  loss  prevented.  The  practical  man  will  naturally 
take  into  account  the  actual,  concrete  condition  in  his  application 
of  general  principles.  The  social  engineer  must,  in  this  partic- 
ular, follow  the  practice  of  the  mechanical  engineer. 

When  we  approach  the  question  of  public  ownership  versus 
private  ownership  of  such  great  industries  as  those  connected 
with  artificial  light  and  transportation,  our  attention  is  attracted 
by  the  municipal  corruption  which  exists,  particularly  in  our  own 
country.  The  fact  of  this  municipal  corruption,  and  also  the 
further  fact  of  the  very  general  incompetency  in  the  management 
of  municipal  affairs,  are  not  called  in  question,  and  they  are  not 
under  discussion.  The  corruption  and  incompetency  may  not 
everywhere  be  so  bad  as  many  pessimists  imagine,  and  it  may, 
furthermore,  be  true  that,  in  both  respects,  we  have  in  many 
cities    witnessed   gratifying   improvement.     Yet,    when    we   have 


96  SELECTED    ARTICLES 

made  these  admissions,  the  true  state  of  the  case  is  bad  enough. 
The  civic  conscience  with  us  is  slow  of  development.  The  satis- 
factory performance  of  public  duties  implies,  in  some  particulars, 
a  higher  civilization  than  we  have  reached.  It  requires  some  de- 
velopment of  the  imagination  to  see  the  harm  and  suffering 
brought  to  countless  individuals  by  lapses  in  civic  virtue.  Fur- 
thermore, it  implies  a  higher  development  of  conscience  than  that 
found  in  primitive  man,  to  reach  that  state  in  which  there  is  a 
conscious  desire  to  abstain  from  all  acts  which  may  hurt  people 
who  are  not  seen.  Many  a  man  will  give  to  a  poor  widow,  whom 
he  sees,  money  to  relieve  her  distress,  but,  at  the  same  time,  will 
not  hesitate  to  increase  the  burdens  of  poor  widows  whom  he 
does  not  see,  by  fraudulent  evasion  of  taxation. 

The  sort  of  men  now  in  our  municipal  councils  are  not  the 
kind  of  men  to  whom  we  would  gladly  turn  over  vast  business  in- 
terests. The  very  thought  repels  us.  Whether  or  not  they  are 
morally  better  or  worse  than  the  men  who  in  many  cases  are  said 
to  corrupt  them,  and  who  now  exercise  an  important  influence  in 
the  management  of  privately  owned  public  utilities,  it  is  freely 
conceded  that  they  are  less  fit  for  the  conduct  of  important  busi- 
nesses. We  w^ant  street  railways  managed  by  men  who  under- 
stand the  street-railway  business,  gas-works  managed  by  men  who 
understand  the  gas  business,  and  neither  class  of  enterprises  man- 
aged by  men  whose  gifts  are  most  conspicuous  in  the  partisan 
manipulation  of  ward  politics.  It  is  important  that  it  shoulti  be 
understood  that  the  advocates  of  municipal  ownership  do  not  call 
in  question  the  fact  of  municipal  corruption  and  inefficiency  in 
the  management  of  public  business,  and  that  they  have  no  desire 
to  turn  over  the  management  of  public  utilities  to  a  class  of  men 
who  must  still  be  considered  typical  in  the  municipal  council  of 
the  great  American  city. 

But  when  we  have  admitted  freely  corruption  and  inefficiency 
in  municipal  government,  it  still  remains  to  examine  into  the 
causes  of  these  conditions,  for  there  is  a  very  widespread  suspi- 
cion that  a  large  share  of  the  responsibility  therefor  must  be  laid 
at  the  door  of  private  ownership.  A  real,  vital  question  is  this : 
would  we  have  the  same  class  of  men  in  our  common  councils 
which  we  now  find  there,  should  public  ownership  replace  private 


MUNICIPAL   OWNERSHIP  97 

ownership?  Is  it  true  that  private  ownership  places  in  office  and 
keeps  in  office  some  of  our  worst  municipal  wrong-doers?  It  is 
important  that  the  reader  should  understand  the  real  nature  of 
the  problem  under  discussion,  and  it  is  believed  that  these  ques- 
tions which  have  just  been  asked  bring  before  us  a  large  part  of 
that  problem.  This  important  problem,  the  solution  of  which  is 
■of  national  significance,  should  be  approached  with  no  partisan 
bias,  and  no  angry  recriminations  or  denunciations  should  be 
tolerated.  The  spirit  of  the  injunction,  "Come,  let  us  reason  to- 
gether," should  be  the  spirit  of  approach. 

We  must  clearly  and  sharply  fasten  in  our  minds  the  indis- 
putable fact  that,  with  respect  to  public  utilities  of  the  sort  under 
discussion,  we  are  confined  to  one  of  two  alternatives.  These 
alternatives  are  public  control  of  private  corporations,  and  public 
ownership  with  the  public  control  which  naturally  springs  from 
ownership.  The  experience  of  the  entire  civilized  world  has 
established  the  fact  that  we  are  restricted  to  these  alternatives. 
We  may  have  private  street-railways,  private  gas-works,  private 
water-works,  etc.,  but  in  that  case  it  is  invariably  and  in  the 
very  nature  of  the  case  necessary  to  exercise  public  control  over 
their  operations.  Charges  must  be  regulated,  general  conditions 
of  service  must  be  prescribed,  and  regulation  must  be  found  for 
a  thousand  and  one  cases  in  which  public  and  private  interests 
touch  each  other.  This  is  because,  on  the  one  hand,  the  nature 
of  the  service  rendered  is  in  such  a  peculiar  degree  a  public 
service,  and  also  because  the  effective  control  of  full  and  free 
competition  is  absent.  We  may,  on  the  other  hand,  choose  public 
ownership  and  management.  We  could,  of  course,  separate  public 
ownership  from  public  management,  and  consider  each  one.  In 
other  words,  we  could  have  a  publicly  owned  urban  transportation 
system  with  private  operation.  Generally,  public  ownership  and 
public  management  go  together,  and  in  the  limited  space  at  our 
disposal  we  will  not  undertake  to  separate  them. 

It  is  freely  granted  that  either  one  of  our  two  alternatives 
presents  immense  difficulties.  This  is  a  further  point  concerning 
which  there  can  be  no  controversy  among  those  who  really  under- 
stand the  nature  of  the  case.  The  evolution  of  industrial  society 
has  again  brought  us  problems  most  difficult  of  solution.     If  we 


98  '      SELECTED   ARTICLES 

may  use  the  language  of  design,  history  teaches  us  that  Provi- 
dence does  not  intend  that  men  organized  in  society  should  have 
what  we  are  always  looking  for  in  the  future,  namely,  an  easy- 
going time.  Every  age  has  its  problems.  In  one  age  they  may  be 
brought  by  the  inroads  of  barbarians,  in  another  age  by  famine 
and  pestilence,  in  another  age  by  international  wars.  We  have 
been  dreaming  of  a  coming  time  when  ho  social  problems  should 
vex  society ;  but,  if  history  teaches  us  anything,  it  shows  us  that 
in  such  dreaming  we  are  indulging  in  Utopian  aspirations.  Every 
civilization  has  been  tested  heretofore,  and  every  civilization  must 
have  its  test  in  the  future,  our  own  included.  One  of  the  tests  of 
our  civilization  is  the  ability  to  solve  the  problem  under  discussion. 

The  question  which  confronts  us  is  this :    Which  one  of  the 
two  alternatives  promises  in  the  long  run  the  best  results? 

Those  who  talk  glibly  about  public  control  of  those  private 
corporations  owning  and  operating  public  utilities  frequently  ex- 
hibit a  sad  ignorance  of  what  their  proposed  remedy  for  existing 
evils  means.  They  think  in  generalities,  and  do  not  reflect  upon 
what  control  means  in  details.  We  have  to.  observe,  first  of  all,  that 
public  control  of  private  corporations  furnishing  public  utilities 
so-called  means  a  necessary  antagonism  of  interests  in  the  civic 
household.  Human  nature  is  such  that  those  who  are  to  be  con- 
trolled cannot  be  satisfied  with  the  control  exercised.  However 
righteous  the  control  may  be,  those  who  are  controlled  will  fre- 
quently feel  themselves  aggrieved  and  wronged,  and  will  try  to 
escape  the  control.  It  is,  furthermore,  a  necessary  outcome  of 
human  nature  that  those  persons  who  are  to  be  controlled  should 
enter  politics  in  order  that  they  may  either  escape  the  control,  or 
shape  it  to  their  own  ends.  Again,  we  must  remember  what  vast 
aggregations  of  men  and  capital  it  is  proposed  to  control.  The 
men  owning  and  operating  the  corporations  which  furnish  public 
utilities  are  numerous,  and  they  maintain  large  armies  of  em- 
ployees of  all  social  grades,  from  the  gifted  and  highly  trained 
attorney  to  the  unskilled  laborer.  The  amount  of  capital  involved 
in  a  great  city  is  counted  by  tens  of  millions.  The  very  nature 
of  the  case  brings  it  about  that  there  should  be  persistent,  never- 
ceasing  activity  on  the  part  of  those  to  be  controlled.  The  effort 
to  escape  from  this  control,  or  to  shade  it,  is  a  part  of  the  efforts 


MUNICIPAL   OWNERSHIP  99 

by  which  men  earn  their  livelihood,  and  their  activity  is  as  regu- 
lar as  their  hunger.  The  efforts  of  patriotic  and  high-minded  citi- 
zens, in  their  self-sacrificing  neglect  of  their  private  affairs  to 
«  look  after  public  concerns,  may  grow  weary,  but  not  so  the  activ- 
ity of  the  corporations  to  be  controlled.  Can  a  task  of  greater 
difficulty  be  well  suggested?  It  is  not  said  that  the  problem  here 
presented  is  one  which  it  is  impossible  for  modern  civilization  to 
solve ;  but  it  is  well  that  the  general  public  should  know  precisely 
what  it  means.  Some  of  us  are  to  control  others  of  us,  and  to  do 
so  against  their  will.  But  who  are  those  whom  we  are  asked 
to  control?  They  are  very  frequently  our  friends  and  neighbors. 
I  am  asked  to  resist  what  is  esteemed  the  extortion  of  a  gas 
company ;  but  one  of  the  gas  magnates  may  be  my  neighbor  and 
friend,  and  occupy  a  pew  next  to  mine  in  church.  Perhaps  the 
gas  magnate  is  my  employer.  Perhaps  he  has  just  contributed, 
and  with  the  best  intent  in  the  world,  one  hundred  dollars  to  an 
object  which  I  have  greatly  at  heart.  Perhaps  I  am  a  college 
professor,  and  the  street-car  magnate  whose  rapacity  I  am  called 
upon  to  help  hold  in  check  has  endowed  the  chair  which  I  occupy. 
Imaginary  illustrations  can  be  continued  indefinitely,  and  those 
who  desire  to  do  so  can  in  any  city  make  them  sufficiently  con- 
crete. Is  it  strange  that  many  of  us  who  are  called  upon  to  con- 
trol others  of  us  should  simply  refuse  to  do  it? 

In  so  brief  an  article  as  this  must  be,  it  is  possible  to  do  little 
more  than  to  throw  out  suggestions.  It  is  noteworthy  that  in 
Massachusetts  public  control  of  corporations  furnishing  public 
utilities  has  been  tried  more  persistently  than  anywhere  else,  and 
that  in  that  State  there  is  a  stronger  sentiment  than  anywhere 
else  in  the  Union  in  favor  of  public  ownership  and  public  man- 
agement. Serious  charges  have  been  brought  against  the  Board 
of  Gas  and  Electric  Lighting  Commissioners,  which  has  to  exer- 
cise control  over  gas  and  electric-lighting  plants.  Even  a  paper 
of  the  standing  of  the  Springfield  Republican  has  felt  called  upon 
to  rebuke  the  board  severely  for  keeping  secret  information  which 
it  has  gathered.  The  attitude  of  the  board  is  characterized  as 
"extraordinary."  "If  the  board,"  says  the  Springfield  Repub- 
lican, "is  empowered  to  keep  secret  what  information  it  is  pleased 
to,  how  are  the  people  to  know  that  they  may  not  become  a  mere 


100  SELECTED    ARTICLES 

agency  of  the  monopolies  to  cover  up  and  justify  their  possible 
undue  exactions  ?"  Insinuations  of  this  kind  are  frequently  heard 
in  Massachusetts.  Dismissing  all  charges  of  corruption  and  bad 
intention,  we  have  as  a  net  result  a  strong  movement  in  Massa- 
chusetts, away  from  private  ownership  of  public  utilities,  to  public 
ownership. 

The  writer  has  followed  this  subject,  and  the  trend  of  opinion 
with  respect  to  it,  for  fifteen  years  with  some  care.  In  his  own 
judgment  the  trend  in  favor  of  public  ownership  is  marked  and 
surprising.  He  has  seen  one  investigator  after  another  start  with 
prepossessions  in  favor  of  public  control  of  private  corporations, 
and  turn  away  from  that  position  as  a  hopeless  one,  and  take  up  a 
position  in  favor  of  public  ownership  as  the  only  practicable  solu- 
tion under  our  American  conditions.  There  lies  before  the  writer 
a  letter  recently  received  from  an  attorney,  a  member  of  a  well- 
known  firm  in  one  of  our  great  cities.  This  lawyer  has  been 
forced  by  experience  to  abandon  the  position  in  favor  of  private 
ownership.  He  says,  as  the  result  of  long-continued  and  self- 
sacrificing  efforts  to  improve  politics  in  his  own  city: 

"The  alleged  benefits  of  regulation  are  practically  as  impossible 
as  an  attempt  to  regulate  the  laws  of  gravitation,  for  our  legis- 
lative councils  are  nominated,  elected  and  controlled  by  forces  too 
subtle  and  insidious  to  be  attacked,  and  even  to  be  known.  *  *  * 
A  community  cannot  regulate  against  millions  of  dollars  organized 
to  prevent  it.  This  temptation  disappears,  however,  when  the 
municipality   becomes   the  owner." 

The  difficulties  of  public  ownership  are  not  to  be  denied.  They 
lie  on  the  surface.  The  problem  in  the  case  of  public  ownership 
is  to  secure  men  of  talent  and  experience  to  conduct  these  enter- 
prises, and  keep  them  in  office  during  good  behavior ;  to  engage 
men  for  all  positions  on  the  basis  of  merit,  and,  while  retaining 
vast  armies  of  employees,  to  enact  such  legislation  and  ad- 
ministrative reforms  as  will  prevent  employees  of  the  city,  en- 
gaged in  furnishing  public  utilities,  from  either  using  their 
political  power  for  their  own  selfish  ends,  or  from  being  used  for 
partisan  purposes.  This  implies,  on  the  part  of  society,  an  appre- 
ciation of  excellence  of  service,  and  a  thorough-going  reform  of 
municipal  civil  service.  Politicians  of  the  baser  sort,  and  all  those 
who  have  selfish  ends  to  be  gained  by  political  corruption,  will 
work  against  such  reform.     On  the  other  hand,  public  ownership 


»  •  i    • 


MUNICIPAL   OWNERSHIP  loi 

with  public  operation  presents  the  issues  in  a  comparatively 
simple  form.  The  clarification  of  issues  is,  indeed,  one  of  the 
strong  arguments  in  favor  of  municipal  ownership.  Who  knows 
to  what  extent  employees  on  the  street  railways  of  Baltim.ore, 
Philadelphia,  New  York  and  Chicago  are  appointed  through  the 
influence  of  politicians?  It  is  known,  however,  that  many  appoint- 
ments are  made  through  the  influence  of  politicians  of  precisely 
the  worst  sort.  It  is  furthermore  known  that  these  corporations 
are  now  generally  in  politics.  But  because  the  corporations 
furnishing  these  public  utilities  are  owners  of  private  property, 
and  because  they  conduct  a  business  which  is  only  quasi-public, 
the  political  corruption  with  which  they  are  connected  is  hidden 
and  obscure,  and  voters  are  confused  and  perplexed.  Public  own- 
ership carries  home  to  every  one  the  importance  of  good  govern- 
ment, and  arrays  on  the  side  of  good  government  the  strong 
classes  in  a  community  now  so  often  indifferent.  Frequently  men 
who  are  powerful  in  a  community,  in  working  for  good  govern- 
ment, work  against,  rather  than  for,  their  own  private  interests. 
It  is,  indeed,  gratifying  to  see  men  of  wealth,  as  frequently  as 
they  do,  turn  aside  from  selfish  considerations  to  promote  meas- 
ures calculated  to  advance  the  general  welfare.  But  can  we  ex- 
pect this  kind  of  conduct  persistently  from  the  great  majority? 
Have  we  any  right  to  expect  it?  A  personal  allusion  is  sufficiently 
instructive  to  warrant  reference  to  it.  When  the  writer  had  in- 
vested what  was  for  him  a  considerable  sum  in  gas  stock,  he  tried 
to  answer  for  himself  this  question :  As  an  owner  of  gas  stock, 
exactly  what  kind  of  a  municipal  government  do  I  want?  The 
government  of  the  city  in  which  was  located  the  gas-works  in 
which  the  writer  was  interested  was  a  stench  in  the  nostrils  of 
reformers  throughout  the  country;  but  he  could  not  persuade 
himself  that  as  an  owner  of  gas  stock  any  very  considerable 
change  was  for  his  interest.  The  city  government,  as  it  then  was, 
was  a  "safe"  one,  and  the  result  of  a  change  could  not  be  foretold. 
Is  not  this,  as  a  matter  of  fact,  the  solution  of  the  problem 
which  owners  of  stock  in  street  railways,  gas-works  and  similar 
enterprises  generally  reach  when  they  look  at  municipal  reform 
solely  from  the  point  of  view  of  self-interest?  And  can  we, 
then,  be   surprised  at  a  certain   apathy  and  indifference   on  the 


102  SELECTED    ARTICLES 

part  of  what  are  called  the  "better  classes"  in  a  community? 
Men  of  great  wealth  have  been  known  to  work  directly  against 
their  own  narrow  interests  for  the  public  weal,  but  has  an  entire 
class  of  men  ever  been  known  to  do  this? 

A  further  result  of  municipal  ownership  would  be  a  better 
balance  between  private  and  public  interests,  and  this  better  bal- 
ance would  strengthen  the  existing  order  against  the  attacks  of 
socialists  and  anarchists,  on  the  one  hand,  and  unscrupulous 
plutocrats,  on  the  other.  A  balance  between  private  and  public 
enterprise  is  what  is  fundamental  in  our  present  social  order,  and 
a  disturbance  of  this  balance  consequently  threatens  this  order. 
This  balance  is  favorable  to  liberty,  which  is  threatened  when  it 
is  disturbed  either  in  the  one  direction  or  the  other.  Any  one 
who  follows  passing  events  with  care  cannot  fail  to  see  that  it  is 
menaced  by  socialism,  on  the  one  hand,  and  by  plutocracy,  on  the 
other.  A  man  of  high  standing  in  Philadelphia,  himself  a  man 
of  large  wealth,  when  presiding  at  a  public  meeting  recently, 
stated,  practically  in  so  many  words,  that  a  professor  in  a  school 
of  some  note  had  lost  his  position  on  account  of  a  monograph 
which  he  wrote  in  relation  to  the  street  railways  of  that  city. 
This  monograph  was  temperate  in  tone,  and  its  scholarly  char- 
acter elicited  commendation  on  all  sides.  We  need  not  go  into  the 
merits  of  this  particular  case,  but  we  cannot  fail  to  notice  dis- 
quieting rumors  in  regard  to  the  attacks  upon  freedom  of  speech, 
which  are  an  outcome  of  private  ownership  of  public  utilities. 
There  is  a  widespread  apprehension  that  the  utterance  of  opinion 
upon  one  side  promotes  one's  interest,  and  that  the  utterance  of 
opinion  upon  the  other  side  may  prove  damaging.  Mathematical 
proof  cannot  be  well  adduced,  but  readers  can,  by  careful  observa- 
tion, reach  a  conclusion  as  to  the  question  whether  or  not  our  in- 
dustrial order  is  menaced  by  plutocracy,  always  bearing  in  mind 
that  plutocracy  does  not  mean  honestly  gotten  and  honestly  ad- 
ministered wealth.  There  are  good  rich  men,  and  bad  rich  men, 
as  there  are  good  poor  men,  and  bad  poor  men.  Does  private 
ownership  of  public  utilities,  on  the  one  hand,  tempt  rich  men  to 
wrong  courses  of  action,  and  does  it,  on  the  other  hand,  place 
great  power  in  the  hands  of  unscrupulous  wealth? 

In  an  article  restricted  as  the  present  is,  it  is  impossible  to  go 


MUNICIPAL   OWNERSHIP  103 

statistically  into  experience.     The  question  may  be  raised,  how- 
ever,  Has   any  one   ever  noticed   an   improvement   in   municipal 
government  from  a  lessening  of  the  functions  of  municipal  gov- 
ernment ?       Can     any    one    point    to     a     municipal    government 
which    has    improved    because    its    duties    have    been    diminished, 
and  the   number  of   its   employees   lessened?      If   we   turn   away 
from     local     government,     do     we     find     that     it     is     through 
the  lessening  of  the  function  of  government  in  general  that  an 
improvement  is  achieved?     At  one  time,  the  Italian  government 
operated  the  Italian  railways.     Later,  it  leased  the  railways  to  a 
private  corporation.     Has  this  retirement  of  Italy  from  the  opera- 
tion of  the  railways  produced  a  regeneration  in  public  life?     As 
we  travel  over  this  country,  and  observe  the  course  of  local  gov- 
ernment, do  we  not,  on  the  contrary,  find  that,  on  the  whole,  it 
has  improved  as  its  functions  have  increased,  and  as  it  appeals 
directly  and  effectively  to  larger  and  larger  numbers?     The  case 
of  England  is  a  very  clear  one.     If  we  go  back  fifty  years,  we 
shall  probably  find  that  the  government  of  English  cities  was  quite 
as  bad  as  ours  is  now.    During  the  past  fifty  years,  there  has  been 
a  continuous   improvement,   and  this   has   accompanied  continual 
expansion  of  municipal  activity,  while  at  the  same  time,  through 
an  extension  of  the  suffrage,  English  municipal  government  has 
become  increasingly  democratic  in  character.     We  must  hesitate 
about  establishing  a  casual  connection  between  these  two  move- 
ments, but  is  it  unnatural  to  suppose  that  there  may  be  such  a  con- 
nection?    When  there  is  a  great  deal  at  stake,  when  the  city  has 
much  to  do,  good  government  of  the  cities  appeals  to  all  right- 
minded  persons  ;  and  if  there  is  no  division  of  interests  through 
private  ownership,  we  ought,  in  a  civilized  community,  to  expect 
to  find  all  honest  and  intelligent  people  working  together  for  good 
government.     A  tangible  basis  is  afforded  the  masses  for  an  ap- 
peal for  higher  interests,  and  reliance  is  placed  upon  municipal 
self-help.     Instead  of  asking  other  people  to  do  things  for  them — 
namely,  great  private  corporations — the  people  are  told  to  help 
themselves. 

Mistakes  and  wrong-doing  must  be  anticipated  under  either 
one  of  our  two  possible  systems.  What  about  the  relative  serious- 
ness  of  the   mistakes   and   wrong-doing,   however?     We   have   a 


104  SELECTED    ARTICLES 

certain  demoralization  in  each  case,  and  a  certain  loss.  While  in 
the  case  of  public  ownership  we  have  an  opportunity  to  recover 
from  mistaken  action,  in  the  case  of  private  ownership  mistaken 
and  wrong  action  is  often  irretrievable  on  its  consequences.  Take 
the  case  of  New  York  City  as  an  illustration.  Jacob  Sharp 
secured  a  franchise  for  the  Broadway  surface  railway  through 
wholesale  corruption,  and  was  sent  to  the  penitentiary.  The  fran- 
chise, however,  was  retained  by  those  into  whose  hands  it  fell, 
and  others  have  entered  into  the  fruits  of  his  theft.  Under  our 
American  system  of  government,  in  cases  of  this  sort  stolen  goods 
are  retained.  The  franchises  are  retained,  and  the  forgotten  mil- 
lions continue  to  suffer,  because  their  rights  have  not  been  ade- 
quately safeguarded.  With  the  other  policy,  namely,  that  of 
public  ownership,  how  different  would  be  the  result?  If  the  street 
railways  were  mismanaged,  or  their  earnings  stolen,  it  would  be 
sufficient  to  turn  out  the  municipal  plunderers.  Too  many  over- 
look what  is  distinctively  American  in  our  problem ;  namely,  our 
constitutional  system,  which  protects  franchise  grants  when  once 
made,  and  renders  so  irretrievable  a  mistaken  policy,  provided  we 
have  the  system  of  private  ownership. 

Let  it  be  distinctly  understood  that  the  position  is  not  taken 
by  the  present  writer  in  favor  of  municipal  ownership  at  any  and 
all  times,  and  everywhere,  and  under  all  circumstances.  It  must 
come  in  the  right  way,  it  must  come  deliberately,  and  it  must 
come  provided  with  adequate  safeguards.  It  must  come  as  a  part 
of  other  movements,  especially  of  full  civic  service  reform.  But 
it  is  calculated  in  itself  to  promote  these  other  reforms,  and  in 
some  cases  municipal  ownership  will  be  the  first  step  in  the  direc- 
tion of  that  full  civil  service  reform  which  is  so  sadly  needed. 
In  some  cases  civilization  may  be  in  too  low  a  condition  to  permit 
municipal  ownership.  The  socialization  of  public  sentiment 
which  must  lie  back  of  proper  social  action  may  not  have  gone 
far  enough.  The  question  is :  Have  we  the  social  man  back  of  the 
social  action  which  we  advocate?  If  we  are  talking  about  the 
heart  of  Africa,  with  its  individualistic  blacks,  unquestionably  we 
have  not  the  social  man  which  would  make  possible  any  consid- 
erable amount  of  social  action.  Among  barbarians  and  semi- 
civilized  people  the   few  must  do  things   for  the  many.     Social 


MUNICIPAL   OWNERSHIP  105 

action  must  not  be  forced  down  from  above,  and  it  must  not  come 
accidentally,  if  it  is  to  be  successful.  It  must  come  as  the  result 
of  full  and  free  discussion,  and  of  full  and  free  expression  on  the 
part  of  the  people.  It  is  on  this  account  that  the  initiative  and 
referendum,  in  a  country  like  ours,  may  properly  accompany  the 
social  action.  Have  we  in  our  own  country  the  social  man  to  back 
social  action?  If  he  does  not  everywhere  exist,  he  is  coming,  and 
coming  rapidly,  and  the  amount  of  social  action  which  the  social- 
ization of  sentiment  makes  possible  and  desirab4e  increases  in 
proportion  as  he  makes  his  appearance.  The  question  of  munic- 
ipal ownership  is  a  question  of  social  psychology.  It  turns  on  the 
nature  of  the  social  mind. 


NEGATIVE  DISCUSSION 

'  Quarterly  Review.  205:  420-38.   October,   1906. 

Municipal  Socialism. 

Municipal  Ownership  Socialistic. 

The  British  Philistine  (B.  Shaw)  is,  we  have  admitted,  a 
little  bitten  with  the  socia/Iist  frenzy ;  but  this  new  political 
arithmetic  will  occasionally  appear  to  him  somewhat  topsy-turvy. 
He  will  ask,  still  stupidly  obsessed,  as  Mr.  Shaw  would  say,  by 
irrelevant  commercial  ideals,  what  is  now  to  replace  the  motive 
of  the  private  undertaker,  and  how  is  the  capital  for  industry  to 
be  provided?  To  this  Mr.  Shaw  has  his  airy  reply.  xA.bility  is  a 
commodity  which  can  be  hired  in  the  market ;  but,  in  a  system 
which  contemplates  the  abolition  of  the  market,  surely  this  is 
a  hard  saying.  Economic  production  at  a  cost  which  will  be 
well  covered  by  the  available  purchasing  power  of  the  community 
is  no  longer  an  object.  We  are  trading  largely  for  the  sake  of 
invisible  profits ;  and  in  matters  of  invisible  profit  the  mere  able 
man  of  industry  is  as  a  child.  The  municipality,  for  instance, 
is  owner  of  gas-works.  Its  object  is  not  to  sell  gas  to  those 
who  are  willing  to  purchase  it  at  a  price  which  will  give  a  profit 
either  to  shareholders  or  ratepayers.  Its  oljject  is  to  give  per- 
manent employment  to  a  happy  and  contented  staff  of  gas- 
workers,  to  light  the  dark  places  of  the  town,  to  see  that  the 
poor  man's  house  is  lighted  as  brilliantly  as  that  of  the  rich,  and 
to  take  care  somehow  that  no  one,  even  remotely  connected  with, 
the  gas-works,  is  either  a  carouser  or  a  debauchee.  This  is  a 
task  not  for  ability  but  for  collectivist  faith-healing.  Its  organ- 
iser, we  suggest,  should  rather  be  the  civic  enthusiast  who  has 
some  skill  in  the  management  of  public  meetings,  and  who,  when 
his  fellow-citizens  want  to  have  electric  light,  can  urge  them 
with  glowing  eloquence  to  rest  content  with  the  inferior  light  for 


MUNICIPAL   OWNERSHIP  107 

the  sake  of  the  common  property  of  the  town,  now  sunk  in  a 
gas-plant,  and  for  the  sake  of  the  staff,  who  otherwise  would 
find  their  occupation  gone  if  they  would  not  consent  to  be  cruelly 
overworked  in  learning  a  new  trade.  This  is  a  task  for  an 
inspired  political  wire-puller,  not  for  the  mere  able  man  of  indus- 
try. 

It  is  not  want  of  sympathy  with  socialist  ideals,  but  abso- 
lute scepticism  as  to  the  practicability  of  the  proposed  methods 
of  achieving  them,  that  deters  the  liberal  economist.  He  has  a 
tempered  faith  in  the  ameliorative  processes  of  liberty.  On  the 
whole,  the  free  organisation  of  industry  does  give  advantage  to 
diligence  and  trustworthiness,  does  discourage  and  ultimately 
procure  the  correction  of  supersession  of  inefficient  methods  and 
character,  while  it  allows  us  to  avail  ourselves  of  the  improve- 
ments which  the  progress  of  science  puts  within  our  reach.  This 
A^iew  promises  no  immediate  millennium,  but  it  explains  our  prog- 
ress in  the  past,  and  seems  to  guarantee  a  similar  advance  in 
the  future.  This  very  phenomenon  of  socialism — what  is  it.  he 
asks,  but  a  sign  of  a  righteous  but  over-sensitive  social  moral- 
ity which  has  grown  up  under  the  very  system  which  it  seeks  to 
demolish?  With  this  charter  of  progress,  such  as  it  is,  the  lib- 
eral economist  must  be  content.  To  him  Mr.  Shaw's  idea  that 
industry  can  be  carried  on  without  being  subjected  to  the  test 
of  finance,  and  without  the  motive  power  arising  frofti  the  ex- 
pectation of  profit,  seems  wildly  fantastic,  if  not  altogether  un- 
imaginable. 


*»' 


Municipal  Ownership  Expensive. 

To  an  optimism  like  Mr.  Shaw's,  which  settles  so  easily  the 
•question  of  management,  the  matter  of  capital  oft'ers  no  diffi- 
culty. The  credit  of  the  municipality  is  such,  he  argues,  that 
it  can  borrow  more  cheaply  than  the  private  trader.  In  passing, 
we  might  remark  that  only  the  larger  municipal  bodies  can  now 
borrow  af  a  cheap  rate  :  and  some  of  them  would  find  it  difficult 
to  borrow  at  all.  But.  accepting  Mr.  Shaw's  statement,  we  may 
ask  why  it  is  that  capital  can  be  borrowed  cheaply  by  munici- 
palities. The  answer,  we  presume,  is.  because  the  security  is 
good,  because  society  acknowledges  its  indebtedness  for  all  time, 


io8  SELECTED   ARTICLES 

and  guarantees  the  principal  and  interest  of  the  debt.  The  in- 
definite extension  of  this  system  is  an  immense  boon  to  the  idle 
capitalist  class,  or,  at  all  events,  to  the  richer  section  of  it.  But 
the  question  surely  remains :  Is  the  system  really  cheap  to  the 
community?     Let  us  consider  a  concrete  instance. 

The  estimated  capital  expenditure  for  the  London  County 
Council's  steamboat  service  is  about  300,000/.  Something  presum- 
ably must  be  added  for  working  capital,  if,  as  is  inevitable,  we 
still  talk  in  the  discredited  language  of  commercial  accountancy. 
The  traffic  is  carried  on  at  a  loss  of  over  53,000/.  per  annum.  The 
53,000/,  loss,  in  Mr.  Shaw's  audit,  is  compensated  by  invisible  as- 
sets, e.g.  the  contentment,  etc.,  of  300  polite  and  skilled  officials 
who,  being  in  municipal  employment,  are,  we  hope,  as  well  satis- 
fied with  their  wages  and  as  free  from  sickness  and  the  other 
inconveniences  of  life  as  Mr.  Shaw's  picture  leads  us  to  expect. 
The  steamers,  it  is  generally  admitted,  go  too  slowly  and  un- 
punctually  to  suit  passengers  on  business  bent;  but  the  account 
must  be  credited  with  pleasant  excursions  enjoyed  by  many  per- 
sons of  leisure  at  a  nominal  cost.  It  is  difficult  to  reduce  these 
advantages  to  figures ;  and,  pending  the  arrival  of  the  new  pro- 
fession of  municipal  accountancy,  we  must  be  content  with  the 
Council's  assurance  that  they  more  than  balance  the  loss  of 
53,000/,  per  annum. 

To  continue,  however,  the  question  of  the  capital  involved.  A 
steamboat  service  on  the  Thames  is  a  very  proper  field  for  enter- 
prise. It  has  been  attempted  by  more  than  one  set  of  private 
capitalists ;  for  hope  springs  eternal  in  the  commercial  breast. 
They  ventured  at  their  own  risk ;  the  public  had  for  a  while  its 
service  of  boats  ;  but,  as  the  ultimate  result,  most  of  the  capital 
is  now  resting  quietly,  a  burden  to  no  one,  figuratively  speaking,, 
at  the  bottom  of  the  Thames ;  and  no  one  except  the  capitalists 
concerned  is  a  whit  the  worse.  The  capital  involved  in  the  Coun- 
ty Council  experiment,  on  the  other  hand,  remains  a  debt  owed  to- 
the  well-to-do  people  who  have  taken  up  County  Council  stock.  It 
will  have  to  be  paid,  interest  and  principal,  by  the  ratepayers  and 
taxpayers  of  the  county,  and  so  becomes  a  permanent  burden  on 
the  community. 


MUNICIPAL  OWNERSHIP  109 

Municipal  Ownership  Not  Enterprising. 

In  considering  the  duration  of  the  life  of  capital  in  other 
walks  of  trade,  we  have  first  to  remember  that  a  very  large 
amount  of  capital  never  makes  any  return  at  all  to  the  investor, 
and  that  most  of  the  investment  which  is  productive  only  remains 
so  because  it  is  constantly  renewed  and  refreshed  by  fresh  doses 
of  capital.  The  disadvantage  of  this  seems  to  lie  entirely  with 
those  who  adventure  the  capital,  viz.  that  class  of  the  public 
which  presumably  is  most  able  to  bear  the  loss.  The  advantages 
belong  to  the  community  at  large,  for  whose  sake  invention  is 
stimulated  and  the  improvement  and  supersession  of  antiquated 
services  encouraged.  It  is  not  to  be  supposed  that  the  same  spirit 
of  enterprise  could  or  should  characterise  the  work  of  a  munici- 
pality which  is  risking  public  funds  which  it  cannot  write  off  as 
bad  debts.  The  same  principle  is  illustrated  by  the  comparative 
impotence,  uselessness,  and  occasionally  absolute  harmfulness  of 
endowments.  The  permanent  withdrawal  of  capital  from  the 
control  of  the  living,  and  its  committal  to  the  sterilising  grasp 
of  the  dead  hand,  are  often  not  far  removed  from  a  public  mis- 
fortune. The  same  unavoidable  danger  seems  to  attend  the 
proposal  to  make  capitalisation  a  municipal  or  national  function. 

The  first  step  of  the  municipalising  enthusiast,  as  we  under- 
stand it,  is  to  warn  the  private  adventurer  off  those  fields  of 
enterprise  which  for  their  inception  require  legislatively  con- 
ferred way-leaves  and  franchises ;  and  it  need  hardly  be  pointed 
out  that  these  constitute  a  very  large  and  increasing  proportion 
of  the  great  industries  of  the  civilised  world.  Investors  who 
otherwise  might  have  ventured  their  money  in  such  undertakings 
are  invited  instead  to  take  up  municipal  stock.  The  whole  burden 
of  preserving  intact  the  evanescent  value  of  such  investment 
will  be  thrown  on  the  rates  and  taxes.  The  old  channel  of 
relief  which  lay  through  the  writing-off  of  the  bad  debts  of  in- 
dustry will  no  longer  be  available ;  and  public  enterprise  will 
sooner  or  later  have  to  face  the  alternative — of  seeing  progress 
brought  to  a  standstill  by  reason  of  the  burden  of  indebtedness 
in  respect  of  improvements  of  which  the  value  has  expired,  and 
of  having  to  decline  new  fields  of  enterprise  in  which  the  yearly 


no  SELECTED    ARTICLES 

increment  of  the  population  might  expect  to  find  its  profitable 
employment ;  or,  on  the  other  hand,  of  repudiating  the  debt,  a 
course  logically  demanded  by  those  who  regard  with  abhorrence 
the  existing  capitalistic  order." 

Monopolistic  Evils  Exaggerated. 

But  the  stronghold  of  the  advocate  of  municipal  trading  and 
the  denouncer  of  profit  is  the  alleged  injury  to  the  public  when. 
3.  service  is  carried  on  by  private  enterprise  under  a  complete 
or  partial  monopoly.  Monopol}^  of  old  was  a  usurpation  granted 
"by  the  Crown  to  an  individual  or  a  corporation,  or  for  some 
plausible  reason  assumed  by  the  public  authority  itself ;  and  the 
profit  which  is  made  under  such  conditions  is  in  reality  a  tax. 
It  is  only  in  comparatively  modern  times  that  monopoly  has  been 
granted  for  the  protection  and  advantage  of  the  public.  Mon- 
opoly is  an  evil  arising  out  of  a  natural  limitation  of  supply, 
and  is  only  to  be  mitigated  by  a  choice  of  evils.  To  give  com- 
pulsory powers,  under  conditions,  to  railways  and  telegraph  com- 
panies seemed  preferable  either  to  allowing  them  to  tear  up  the 
streets  at  their  will,  or  to  making  the  public  wait  for  the  advan- 
tage of  railways  and  telegraphy  till  the  companies  could  agree 
with  private  owners.  Xo  great  principle  seemed  at  stake.  Gas, 
water,  and  sewage  were  managed  by  companies  or  public  author- 
ities, as  accident  decided.  Of  old  time  the  Government  claimed 
a  monopoly  in  letter-carrying,  and  later  insisted  on  adding  to 
it  the  telegraph  and  the  telephone,  which  seemed  formidable 
competitors.  It  allows  messenger  companies,  but  exacts  from 
them  a  heavy  royalty ;  and  as  yet  it  has  made  no  claim  to  a 
monopoly  of  carrying  parcels.  The  Government  makes  roads, 
but  not  railroads ;  it  is  partially  responsible  for  harbours,  but 
not  for  railway  stations.  No  one  invariable  principle  has  been 
followed. 

The  difficulty  of  protecting  the  public  in  monopolised  serv- 
ices as  adequately  as  it  is  protected  in  other  services  by  competi- 
tion is  probably  not  wholly  superable.  If,  as  with  the  Post-office, 
the  Government  constitutes  itself  sole  contractor,  it  is  impossible 
to  say  what  we  may  have  lost  in  efficiency.  Letters  are  carried 
at  a  profit,  but  all  other  branches  of  post-office  work  are  con- 


MUNICIPAL   OWNERSHIP  iii 

ducted  at  a  loss ;  and  by  common  consent  we  have  the  worst 
telephone  service  in  the  civilised  world.  We  have  not  even  the 
consolation  that  the  postal  staff  is  made  thoroughly  happy. 

If  next  we  consider  the  important  service  of  railways,  we 
shall  find  that  the  protection  of  the  public  is  more  effectively 
carried  out  by  competition,  which  was  supposed  to  be  excluded, 
than  by  the  regulations  of  the  Board  of  Trade,  though  these  have 
been  carefully  and  wisely  contrived.  To  begin  with,  there  has 
always  been  competition  between  one  railway  and  another ;  roads 
and  canals  and  sea-carriage  are  still  available;  but  probably  the 
greatest  incentive  to  diligence  in  the  public  service  has  been  the 
recognised  disposition  on  the  part  of  goods  and  people  to  stay 
where  they  are  unless  movements  are  encouraged  by  cheap 
and  attractive  conditions  of  travel.  If  we  consider  the  fact  that 
there  are,  as  a  rule,  alternative  ways  of  doing  what  we  want  to 
do,  and  that  much  that  we  want  to  do  may  very  well  be  left 
undone,  it  will  appear  that  the  evil  of  railway  and,  indeed,  of 
all  monopoly  is  much  exaggerated.  Purveyors  of  service  for  our 
luxuries,  amusements  and  necessities  compete  more  or  less  un- 
consciously one  against  another.  If  fine  cognac  is  dear,  we 
pretend  to  prefer  Scotch  whisky ;  if  a  holiday  by  railway  is  un- 
comfortable owing  to  overcrowding  and  expense,  we  take  a 
steamer  to  Cromer  or  to  Norway.  Even  if  a  business  journey 
to  Birmingham  might  seem  desirable,  the  excessive  cost  of  it 
may  decide  us  to  make  shift  to  manage  by  means  of  letter  or 
telegram. 

Summing  up  this  portion  of  our  argument  we  may  say  that 
the  evil  of  monopoly  is  very  much  exaggerated  ;  that  regulation 
for  the  protection  of  the  consumer  is  possible ;  that  a  closer  con- 
sideration of  the  different  methods  of  introducing  regulations 
might  even  warrant  us  in  increasing  the  sphere  of  monopolised 
industries  served  by  private  enterprise ;  and  lastly,  that,  even  if 
regulation  is  evaded  and  a  considerable  profit  is  made,  the  earn- 
ing of  profit  is  a  legitimate  incident  in  industry,  and  that  the 
existence  of  a  guaranteed  investment  has  a  public  and  general 
convenience.  It  is  frequently  argued,  and  with  some  plausibility, 
that  the  existence  of  state  and  municipal  debt  has  a  great  ad- 
vantage as  providing  financial  convenience  to   banks,   insurance 


112  SELECTED    ARTICLES 

offices,  provident  societies,  trustees,  and  persons  responsible 
for  the  custody  of  charitable  and  similar  funds.  Stocks  repre- 
senting partially  monopolised  undertakings  offer  a  field  for  the 
investment  of  such  funds  which  is  not  open  to  the  objection 
urged  against  the  municipal  capitalisation  of  industry  pure  and 
simple,  namely,  that  municipal  debts  exist  for  the  advantage 
of  the  rentier  class  only,  and  that  they  withdraw  capital  from 
the  risks  of  competition  to  which,  in  the  interest  of  the  general 
consumer,  ordinary  investment  is  properly  liable. 

Municipal  Area  Limits  Industry. 

The  economical  creation  and  distribution  of  electrical  power 
can  only  be  carried  out  on  a  grand  scale ;  and  for  the  inception 
of  such  enterprise  parliamentary  powers  are  needed.  The  areas 
of  municipalities  are  admittedly  too  small  to  satisfy  this  condi- 
tion. Local  Government  divisions  generally  have  arbitrary 
boundaries,  and  do  not  lend  themselves  to  the  advantageous 
grouping  of  power-areas.  The  supply  of  electrical  energy  to  the 
mechanical  industries  of  this  country  is  an  undertaking  of  un- 
precedented magnitude.  Not  only,  it  is  suggested,  can  the 
present  uses  of  steam  and  gas  be  largely  superseded  by  the  new 
force,  but  industries  and  uses  altogether  new  and  unimagined 
are  waiting  to  be  called  into  existence.  Large  fortunes  will  be 
made,  and  large  fortunes  will  be  lost,  in  experiments.  If  we  are 
to  feed  and  find  employment  for  the  increasing  millions  of  this 
country,  and  to  hold  our  place  in  the  van  of  nations,  we  have 
need  here  of  a  lavish  and  reckless  expenditure  of  money  by  the 
captains  of  the  industry. 

It  is  painful,  therefore,  to  be  forced  to  the  conclusion  that 
this  movement  is  being  strangled  in  its  infancy  by  the  miserable 
jealousy  and  self-sufficiency  of  the  municipal  monopolist. 
Municipalities,  unabashed  by  the  revelations  of  municipal  in- 
competence at  Poplar  and  West  Ham,  are  asking  that  they  shall 
be  made  the  monopolists  of  a  force  on  which  the  whole  future 
of  British  industry  probably  depends.  The  impotence  of  the 
larger  authority,  the  County  Council,  for  such  a  task  is  hardly 
less  marked.  The  leading  spendthrifts  of  Poplar  are  influential 
members  of  the  London  County  Council.     They  have  overborne 


MUNICIPAL   OWNERSHIP  113 

the  opinion  of  competent  financiers  like  Lord  Welby,  the  chair- 
man of  their  own  finance  committee,  and  are  determined  to 
obtain  a  monopoly  for  the  supply  of  electrical  energy.  Hitherto 
this  dire  calamity,  which  would  probably  condemn  London  to 
gradual  but  certain  industrial  decay,  has  been  averted;  but, 
wuth  one  or  two  exceptions,  notably  at  Newcastle,  the  agitation 
has  succeeded  in  its  dog-in-the-manger  policy  of  defeating  all 
applications  from  private  companies  for  leave  to  speculate  in 
this  vast  field  of  industry.  Meantime  we  are  being  overtaken 
and  relegated  to  an  inferior  rank  among  industrial  nations  by 
countries  which  have  found  means  to  evade  the  rapacity  and 
stupidity  of  these  obstructive  tactics.  It  is  not  now  a  question 
of  protecting  the  helpless  consumer ;  that  disguise  will  no  longer 
serve ;  the  managers  of  the  industrial  enterprise  of  this  country 
do  not  ask  to  be  protected  from  the  monopoly  of  private  ad- 
venturers, but  from  the  incompetence  and  inadequacy  of  munici- 
pal management. 

We  have  followed  the  example  of  Mr.  Shaw  and  have  dis- 
cussed the  question  in  its  larger  aspects.  We  agree  that  refer- 
ence to  figures  is  probably  irrelevant  when  addressed  to  those 
who  are  forcing  on  this  movement.  The  strength  of  the  party 
of  municipal  monopoly  is  pure  fanaticism.  Its  adherents  re- 
pudiate accountancy  and  rely  on  arguments  which  hardly  seem 
to  touch  the  ground  of  common-sense.  In  Major  Darwin's  work 
the  reader  who  desires  a  more  detailed  consideration  will  find 
a  most  dispassionate  discussion  of  the  merits  and  demerits  of 
each  argument.  Like  Mr.  Shaw,  he  recognises  that  the  appeal 
to  balance-sheets  is  futile.  He  suppresses,  however,  any  in- 
clination he  may  feel  to  decide  the  question  by  reference  to  a 
general  principle,  and  considers  each  allegation  on  its  merits. 
This  procedure  will  be  found  most  useful  for  those  who  are 
disposed  to  regard  the  subject  as  an  open  question;  but,  as  we 
have  argued,  the  whole  controversy  is  overshadowed  by  the 
larger  issue  of  whether  we  are  prepared  to  make  a  great  ex- 
periment in  collectivism.  If  we  are  not  prepared  for  this, 
municipal  trading  stands  condemned;  it  can  only  be  logically 
acceptable  to  those  who  regard  it  as  a  starting-point  for  a  far- 
reaching  economic   revolution  w^hich  they  earnestly  desire. 


114  SELECTED    ARTICLES 

World   To-Day.    12:    374-9.   April,    1907. 

Municipal  Ownership  of  Electric  Light  Plants.     James  R. 

Cravath. 

Does  it  pay  a  city  to  go  into  the  electric  light  business?' 
Should  it  own  its  street-lighting  plant  or  should  it  let  the  con- 
tract to  a  private  compan}^?  These  are  questions  which  have 
perplexed  the  voters  in  many  towns.  The  average  citizen  who 
pays  the  taxes  needs  only  to  have  the  evidence  on  both  sides  laid 
fully  before  him  to  decide  and  vote  in  the  way  most  favorable  to 
his  pocketbook.  His  difficulty  usually  is  to  get  the  evidence. 
On  the  one  hand,  if  the  most  radical  advocates  of  municipal  own- 
ership are  to  be  believed,  the  electric-lighting  companies  of  the 
country  are  earning  enormous  profits,  which  under  municipal 
ownership  would  stay  with  the  taxpayers  and  consumers.  On 
the  other  hand,  according  to  some  of  those  opposed  to  munici- 
pal ownership,  such  ownership  has  a  record  of  dismal  failures,, 
mismanagement  and  graft.  The  majority  of  thoughtful  citizens 
who  belong  to  neither  of  these  two  radical  classes  are  looking 
for  the  truth,  which  (as  usual  in  such  arguments)  lies  some- 
where between  the  two  extremes.  I  will  aim  to  present  in  an 
unprejudiced  way  some  of  the  essential  facts  on  both  sides,  as 
observed  during  many  years'  work  and  familiarity  with  the 
electric  light  and  power  industry  of  the  country,  both  as  carried 
on  by  cities  and  by  private  corporations. 

In  the  case  of  a  large  number  of  the  electric  light  plants 
owned  by  municipalities  in  the  United  States,  the  question  of 
city  versus  private  ownership  was  never  an  issue,  for  the  reason 
that  the  towns  are  so  small  and  the  profits  so  uncertain  that  if 
the  city  did  not  build  the  plant  no  one  else  would.  These  we 
must  evidently  leave  out  of  account  in  our  discussion.  What, 
then,  are  the  objects  sought  by  a  city  which  establishes  its  own 
electric  light  plant  if  private  capital  has  embarked,  or  is  willing 
to  embark  in  the  enterprise?  Evidently  to  save  money  for  the 
taxpayers  or  to  get  better  service. 

The  Question  of  Profits. 

The  common  argument,  of  course,  for  the  establishment  of  a 
municipal    plant    is    that    the    city    will    gain    the    profits    which 


MUNICIPAL   OWNERSHIP  115 

ordinarily  go  to  a  private  company  undertaking  a  street-lighting 
contract.  But  what  are  the  profits  actually  earned  by  electric 
light  and  power  companies  through  the  country? 

Whether  an  electric  light  plant  is  built  by  the  city  or  by  a 
company,  interest  should  be  paid  on  the  investment.  If  we  as- 
sume that  a  large  part  of  the  cost  of  construction  is  paid  by  issu- 
ing bonds,  it  is  undoubtedly  true  as  claimed  by  municipal  own- 
ership advocates  that  a  city  can  sell  bonds  bearing  a  lower  rate 
of  interest  than  could  a  private  corporation  doing  the  same 
business.  It  will  be  evident,  however,  that  a  difference  of  one 
or  two  per  cent  in  bond  interest  on  a  plant  may  easily  be  counter- 
balanced by  other  factors,  such  as  the  rate  of  wages  paid  and 
the   efficiency  of  the   management. 

It  is  of  first  importance  to  determine  in  this  connection  the 
actual  profits  being  made  by  electric  light  and  power  companies 
over  and  above  the  common  rates  of  interest  paid  on  municipal 
bonds.  If  such  profits  or  dividends  are  considerably  above  in- 
terest rates  on  municipal  bonds,  we  have  at  once  a  strong  in- 
centive for  municipalities  to  enter  into  electric  lighting  business 
themselves.  Otherwise  one  great  argument  for  municipalization 
disappears. 

Unfortunately  there  are  no  figures  available  on  the  financial 
condition  of  electric  lighting  companies  the  country  over,  and 
we  must  fall  back  upon  our  general  knowledge  of  the  business 
and  the  statistics  of  a  few  localities.  The  State  of  j\Iassa- 
chusetts  for  twenty  years  past  has  had  an  excellent  system  of 
regulating  electric  light  companies  and  municipal  plants  and 
safeguarding  the  interests  of  both  stockholders  and  public. 
Yearly  reports  are  made  to  a  board  of  gas  and  electric  light 
commissioners,  both  by  private  companies  and  municipal  plants. 
We  have  therefore  from  Massachusetts  more  complete  infor- 
mation as  to  the  state  of  the  industry  than  from  any  other  state  or 
locality.  We  can  place  more  confidence  in  the  reports  of  this 
commission  than  in  most  of  the  other  statistics  cited  in  connec- 
tion with  municipal  ownership  controversies,  for  the  reason  that 
the  methods  of  classifying  accounts  and  making  reports  as  well 
as  the  issuance  of  stock  and  bonds  are  controlled  by  the  com- 
mission according  to  certain  uniform  regulations,  and  have  been 


ii6  SELECTED    ARTICLES 

for  many  years.  Companies  and  municipalities  not  required  to 
report  according  to  such  fixed  rules,  if  they  issue  reports  of 
their  financial  conditions  at  all,  issue  them  in  such  various 
shapes  that  no  one  but  an  expert  can  analyze  them  in  a  way  to 
afford  a  true  comparison,  and  frequently  even  an  expert  can 
not  make  such  comparison  without  actual  further  examination 
of  the  books. 

In  Massachusetts,  according  to  the  1905  report  of  the  com- 
missioners, of  the  fifty-six  purely  electric  light  and  power  com- 
panies in  the  state,  twenty-four  paid  no  dividends ;  one  paid  a 
dividend  of  two  per  cent;  one  a  dividend  of  four  per  cent;  one 
a  dividend  of  4.5  per  cent;  four  a  dividend  of  five  per  cent; 
eleven  a  dividend  of  six  per  cent;  three  a  dividend  of  seven  per 
cent;  eight  a  dividend  of  eight  per  cent;  one  a  dividend  of  nine 
per  cent,  and  two  paid  dividends  of  ten  per  cent.  In  some  states 
with  some  kinds  of  corporations  these  statistics  on  dividends 
would  give  little  indication  of  the  per  cent  of  earnings  on  the 
actual  investment,  because  of  the  common  practice  of  issuing 
watered  stock  for  which  but  a  small  per  cent  of  the  face  value 
has  been  paid.  In  Massachusetts,  however,  where  securities  for 
many  years  past  have  been  issued  only  upon  approval  of  the 
commission,  to  pay  for  actual  improvements  in  a  plant,  these 
figures  can  safely  be  accepted  as  indicating  very  nearly  the  true 
state  of  affairs.  This  statement  as  to  dividends,  of  course,  does 
not  show  what  earnings  may  be  put  back  into  the  property  in 
the  shape  of  new  construction  and  extensions.  In  this  latter 
connection  it  is  of  interest  to  note  that  the  combined  balance 
sheets  of  the  Massachusetts  companies  show  a  surplus  of  10.76 
per  cent  on  the  entire  capital  stock,  in  the  1905  report,  but  this  is 
less  than  the  surplus  showed  the  year  previous. 

These  figures  simply  demonstrate  what  is  known  to  every 
well-posted  man  in  the  business :  namely,  that  electric  light  com- 
panies, when  well  managed  and  if  in  sufficiently  large  towns,  can 
be  reasonable  expected  to  pay  the  usual  prevailing  rates  of  interest 
on  investment,  and  in  some  cases  a  little  more  than  that,  but  that 
there  are  plenty  of  companies  which  either  for  the  lack  of  good 
management  or  for  some  local  reason  are  earning  practically  noth- 
ing.   There  is  certainly  nothing  in  these  figures  to  indicate  that  enor- 


MUNICIPAL   OWNERSHIP  117 

mous  profits   are  to  be  pocketed  by  taxpayers  as  a  result  of  a 
municipal   electric   light  plant. 

Rates  of  Mu7iicipal  and  Private  Companies. 

But  are  the  street  lighting  rates  in  the  Massachusetts  cities 
served  by  private  companies  the  same  as  those  where  there  are 
municipally-owned  plants?  Consulting  the  Massachusetts  report 
further  to  determine  this  point,  we  find  that  the  rates  per  year 
for  arc  lamps  commonly  rated  as  1200  c.  p.  are  from  $104,  the 
highest  rate,  to  $54.69,  the  lowest.  In  municipal  plants  the  cost 
of  such  lamps  is  given  as  from  $133,  the  highest,  to  $53.34,  the 
lowest.  In  the  Massachusetts  figures,  of  course,  interest  on  the 
investment  is  included,  as  it  should  be  in  all  such  reports.  Taken 
altogether,  the  cost  of  street  lighting  by  municipal  plants  in 
Massachusetts  is  not  strikingly  different  from  that  in  cities 
supplied  by  private  companies,  although  the  highest  municipal 
figures  are  considerably  above  the  highest  contract  figures. 

The  reason  that  these  Massachusetts  figures  on  costs  of 
municipal  lights  do  not  correspond  with  some  which  we  see 
quoted  by  radical  municipal  ownership  advocates  on  plants  in 
other  states  is  that  in  Massachusetts  the  law  requires  that  an 
allowance  of  five  per  cent  of  the  cost  of  the  plant  shall  be  made 
yearly  for  depreciation.  This  allowance  is  certainly  none  too 
much,  and  in  some  cases  is  too  little,  but  it  is  frequently  left  out 
of  account  altogether  in  figuring  the  cost  of  municipal  lighting 
on  a  plant  owned  by  a  city. 

Another  set  of  statistics  which  throw  some  light  on  the 
amount  of  profit  in  electric  lighting  business  in  general  is  ob- 
tainable from  a  report  made  by  the  secretary  of  the  Iowa  Elec- 
trical Association  to  that  body  in  1906.  The  secretary  obtained 
reports  from  seventy-seven  electric  light  companies  in  that  state. 
The  average  dividend  was  2.95  per  cent. 

New  York  state  also  has  had  for  a  short  time  a  gas  and 
electric  light  commission  under  laws  similar  to  those  in  Massa- 
chusetts. The  returns  made  indicate  in  general  a  very  similar 
condition  of  affairs  to  that  in  Massachusetts.  On  the  whole, 
from  my  knowledge  of  the  business  the  country  over,  I  think 
the  Massachusetts  figures  would  correspond  closely  to  those  in 


ii8  *    SELECTED    ARTICLES 

the  majority  of  other  states,  were  the  figures  known,  except 
that  a  very  limited  number  of  companies  may  temporarily  earn 
a  little  better  than  ten  per  cent. 

I  have  so  far  considered  this  question  of  financial  returns 
only  in  a  general  way,  without  taking  up  specific  examples.  For 
those  who  wish  to  study  such  specific  examples  the  published 
reports  of  the  Massachusetts  and  New  York  commissions  are 
open.  As  the  former  reports  are  made  on  uniform  systems  of 
accounting,  comparisons  can  fairly  be  made  between  the  different 
companies  and  municipalities  reporting.  Specific  examples  from 
other  states  have  been  cited  many  times  in  municipal-ownership 
controversies,  but  because  of  the  great  differences  in  methods  of 
accounting,  as  before  explained,  they  are  likely  to  be  almost 
worthless  for  purposes  of  comparison  unless  scrutinized  closely 
by  experts. 

Chicago  and  Muncie. 

One  of  the  most  prominent  examples  of  a  municipally-owned 
electric  light  plant  is  that  of  Chicago,  about  which  there  has 
been  considerable  controversy.  Chicago's  municipal  electric 
light  plant,  unlike  many  others,  was  not  built  by  the  sale  of 
bonds,  but  has  been  paid  for  a  little  at  a  time  out  of  the  general 
tax  levy  as  the  plant  has  been  gradually  enlarged.  According  to 
the  last  published  report  of  the  city  electrician,  in  which  interest 
on  the  money  was  figured  in  both  cases,  there  has  been  a  saving 
to  the  city  of  something  like  ten  per  cent  in  the  total  cost  of 
street  lighting  for  the  entire  period  of  eighteen  years  the  city 
plant  has  been  in  operation.  This  statement,  however,  assumes 
that  the  cost  per  lamp  under  a  private  contract  would  have  been 
the  same  as  the  city  has  been  paying  a  company  for  a  few  rented 
lamps  in  widely  scattered  outlying  districts  where  the  city  could 
not  operate  as  cheaply.  As  to  whether  Chicago  would  have 
had  to  pay  for  a  large  number  of  electric  street  lamps  as  much 
as  it  has  been  paying  for  a  comparatively  small  n'umber  of  scat- 
tered lamps  on  short  and  uncertain  contracts;  is,  of  course, 
problematical. 

According  to  Haskins  &  Sells,  expert  accountants,  who  went 
through  the  Chicago  lighting  accounts  about  six  years  ago,  the 


MUNICIPAL   OWNERSHIP  119 

operating  cost  of  a  municipal  450-\vatt  arc  lamp  in  the  city  of 
Chicago  in  the  year  1900  was  $62.09;  and  the  total  cost,  including 
water,  insurance,  taxes,  depreciation  and  interest  charges  was 
$99.08.  Allowing  for  certain  items,  over  which  there  may  be 
controversy,  it  is  safe  to  say  that  the  cost  per  lamp  was  over  $90, 
including  lixed  charges,  which  is  not  far  from  the  average  paid 
in  other  great  cities.  The  rate  paid  for  similar  lamps  in  New 
York  city  is  $100,  but  coal  and  distribution  investments  are 
higher   in    New    York. 

Chicago  has  what  might  be  rated  as  one  of  the  relatively 
successful  municipal  plants.  Among  the  decidedly  unsuccessful 
ones,  a  conspicuous  example  was  that  at  Muncie,  Indiana.  This 
city  had  a  municipal  street-lighting  plant  which  cost  $36,000. 
In  eleven  years,  under  council  committee  management  (or  lack 
of  it),  the  operating  cost  per  lamp  nearly  doubled.  The  superin- 
tendent, in  his  annual  report  made  before  the  final  demise  of  the 
enterprise,  recommended  that  if  the  city  could  not  find  the 
money  with  which  to  improve  the  plant,  it  had  better  sell  to 
private  parties,  or  buy  current  from  some  private  company.  The 
matter  was  brought  to  a  head  by  the  bursting  of  a  fly-wheel  in 
the  municipal  plant  and  the  wrecking  of  the  station.  A  ten-year 
contract  was  then  made  with  the  electric  light  company  to 
supply  street  lamps  at  a  cost  far  below  the  operating  cost  shown 
by  the  yearly  reports  of  the  municipal  plant.  The  municipal 
plant,  upon  which  $36,000  had  been  expended  in  construction, 
was  valued  by  a  board  of  appraisers  at  $15,000,  or  a  depreciation 
of  $21,000,  with  no  fund  to  provide  for  it. 

Management  the  Vital  Matter. 

I  might  go  on  and  cite  numerous  cases  of  disastrous  munici- 
pal electric-light  plant  ventures  and  I  might  also  cite  some 
cases  of  Vv'ell  managed  and  successful  municipal  plants. 

If  a  proper  depreciation  account  is  not  kept  and  a  municipal 
plant  is  not  insured  for  its  actual  value,  it  is  the  whole  body  of 
taxpayers  who  suffer  when  the  plant  is  destroyed  by  accident. 
When  a  company  gives  poor  service  or  charges  high  rates,  the 
public  at  large  will  be  much  more  benefited  by  taking  measures 
to  secure  adequate  control  of  the  offending  company  than  they 


120  SELECTED   ARTICLES 

will  by  trying  to  take  over  the  business  of  the  company,  the  dif- 
ficulty of  whose  operation  is  not  known. 

In  the  case  of  both  private  and  municipal  plants,  the  margin 
of  profit  is  small  enough  for  good  or  bad  management  to  throw 
the  balance  one  way  or  the  other.  But  with  this  difference:  If 
the  private  plant  is  mismanaged  it  is  no  concern  of  the  taxpayer ; 
it  concerns  only  stockholders.  Under  a  contract  with  a  private 
company  for  street  lighting  at  a  reasonably  low  rate,  the  tax- 
payer takec5  no  risk  save  a  possibility  of  paying  a  small  per- 
centage more  for  given  services  than  he  would  pay  if  the  city  ran 
the  plant.  If  the  city  owns  the  plant,  he  may  get  his  street 
lighting  for  a  little  less  than  he  would  pay  the  private  company, 
but  with  the  tolerable  certainty  that  if  there  is  grafting  or  in- 
competency in  the  management  of  the  plant,  he  will  pay  a 
good  deal  more.  In  fact,  it  is  a  kind  of  one-sided  speculation 
except,  of  course,  where  reasonable  rates  can  not  be  obtained 
from  a  private  company.  The  taxpayers  of  a  city  usually,  there- 
fore, should  think  several  times  before  embarking  in  such 
enterprises. 

TJie  Energy  of  Private  Management. 

As  the  management  of  municipal  electric  light  plants  is. 
such  an  important  factor  in  determining  whether  it  is  a  losing 
proposition  or  not,  let  us  inquire  into  the  possibilities  for  good 
or  bad  management  in  connection  with  it.  I  am  not  one  of 
those  who  believe  that  municipal  management  is  necessarily 
and  invariably  incompetent.  This  is  disproved  by  a  number 
of  cases  where  municipal  enterprises  were  well  managed.  But 
there  are  certain  things  in  American  municipal  affairs  to 
which  we  can  not  shut  our  eyes,  however  much  we  may  hope 
to  change  them  within  the  next  twenty-five  years.  The  war 
against  graft  in  municipal  politics  has  been  making  considerable 
headway  the  past  ten  years,  and  we  may  hope  to  see  it  make 
even  better  headway  the  coming  ten  years ;  nevertheless  graft 
is  a  factor  to  be  considered. 

The  fact  is  that  at  the  present  time  it  is  as  a  rule  difficult 
to  get  the  best  class  of  men  for  the  management  of  municipal 
enterprises.     Why?      In   the    first   place,    a   man    of    ability   and 


MUNICIPAL   OWNERSHIP  121 

ambition  will  usually  prefer  to  work  for  a  private  corpora- 
tion where  opportunities  for  advancement  and  appreciation 
of  ability  are  better  than  in  municipal  service,  and  where  he 
is  more  certain  of  his  position.  The  man  working  for  a  mu- 
nicipality is  altogether  uncertain  as  to  his  future  or  as  to 
the  competency  or  incompetency  of  the  council  committees 
to  which  he  may  be  responsible.  As  he  is  working  for  the 
public,  he  is  subject  to  all  sorts  of  criticisms  to  which  an  offi- 
cer in  a  private  corporation  is  not  subject,  and  may  even  be  sus- 
pected of  grafting  because  he  is  a  city  employee  and  for  no 
other  reason.  These  things,  no  doubt,  account  for  the  fact 
that  comparatively  few  men  of  promise  in  the  electric  lighting 
industry  of  the  country  are  to  be  found  in  municipal  plants. 
In  my  personal  experience  on  the  editorial  staff  of  a  paper 
devoted  to  the  electric  lighting  industry  and  in  traveling  among 
such  plants,  I  almost  invariably  find  that  the  up-to-date,  pro- 
gressive and  aggressive  management  which  contributes  to  the 
general  progress  of  the  art  is  to  be  found  in  private  rather  than 
municipal  plants. 

Graft  and  Public  Ozunership. 

The  advocates  of  municipal  ownership  have  laid  considerable 
stress  on  the  possibility  for  corruption  of  city  councils  and 
other  officers  in  connection  with  the  letting  of  the  street-lighting 
contracts  or  franchises  to  private  companies.  That  there  are 
such  possibilities,  especially  in  the  larger  cities,  no  one  will 
deny.  On  the  other  hand,  is  it  not  likely  that  a  city  government 
composed  of  rascals  would  find  even  more  opportunity  for  rob- 
bing the  taxpayer  under  municipal  ownership?  In  the  case 
of  a  private  contract  the  amount  is  definitely  known  to  every 
one  at  the  time  the  contract  is  made,  and  if  there  is  anything 
very  unreasonable  about  the  proposition,  public  sentiment  will 
enforce  reasonable  terms  before  the  contract  is  signed.  When 
the  public  utility  is  municipally  owned,  it  is  a  difficult  matter 
to  locate  and  prevent  graft  both  large  and  small. 

Space  is  not  available  here  to  cite  specific  examples  of  suc- 
cessful and  unsuccessful  municipal  plants  at  any  length,  but  I 
may   mention   a   few   of   the   extremes.     One   of   the   most   sue- 


122  SELECTED    ARTICLES 

cessful  municipal  plants  I  know  of  is  that  at  Marquette,  IMich- 
igan,  where  the  city  developed  a  water-power.  The  property 
is  managed  much  like  that  of  a  private  company.  Considerable 
power  load  is  carried.  S-o  enterprising  has  been  the  management 
that  the  gross  earnings  from  operation,  according  to  the  annual 
reports,  are  as  high  as  $4.20  per  capita  of  population.  Most 
private  companies  are  not  doing  as  well  as  to  gross  earnings. 
The  lighting  department  of  the  city  is  kept  separate  from  all 
others,  jr.st  as  if  it  were  a  company,  and  it  is  paid  $75  per  year 
for  a  20O0-c.p.  arc  lamp.  For  the  balance  of  the  revenue  the 
management  of  the  plant  is  dependent  on  its  own  enterprise. 
Chicago's  plant  is  mentioned  elsewhere.  Detroit's  municipal 
plant  may  also  be  rated  among  the  more  successful.  While 
lamp  costs  in  Chicago  and  Detroit  are  nowhere  near  as  low 
as  advertised  by  municipal  ownership  advocates  in  years  past, 
they  are  not   far   from  prevailing  contract   rates. 

Failures  of  Municipal  Plants. 

Among  recent  municipal  ownership  failures  may  be  enu- 
merated Muncie,  Indiana,  mentioned  elsewhere,  plant  abandoned, 
and  bonds  not  paid  off ;  La  Grange,  Illinois,  plant  sold  to  a  com- 
pany ;  Elgin,  Illinois,  municipal  costs  so  high  that  contract  was  let 
to  company;  Jonesboro,  Indiana,  plant  turned  over  to  bondhold- 
ers ;  Alexandria,  Virginia,  plant  leased  to  a  company  for  thirty 
years ;  Ashtabula,  Ohio,  $88,000  plant  depreciated  $50,000  in 
fourteen  years,  advertised  for  sale ;  Brunswick,  Missouri,  plant 
sold  for  thirty-five  cents  on  the  dollar,  city  taking  pay  in  light  and 
water;  Casselton,  North  Dakota,  plant  sold  for  two-fifths  cost; 
Siloam  Springs,  Arkansas,  $30,000  plant  leased  for  $600  per 
year;  Peru,  Indiana,  council  investigating  committee  found  arc 
lamps  cost  $207  per  year  and  advised  that  the  city  abandon 
the  business  and  sell  the  plant :  Linton.  Indiana,  plant  leased  for 
five  years ;  Hamilton,  Ohio,  gas  plant  shut  down  and  state  exam- 
iner reported  deplorable  financial  conditions  and  abnormal  costs 
due  to  faulty  construction  in  electric  light  plant;  Bloomington, 
Illinois,  increase  from  $58  to  $65  in  yearly  cos^of  arc  lamps 
in  ten  years,  although  cost  should  have  been  less;  Easton,  Penn- 
sylvania,  mayor    favors   letting   of   private   contract   if    city   can 


MUNICIPAL   OWNERSHIP  123 

not  maintain  better  service,  and  business  men  petition  for  such 
a  contract ;  Lakewood,  Ohio,  expert  accountant  found  cost 
of  arc  lamps  about  double  the  price  offered  by  a  private  com- 
pany. 

Conclusion. 

What  conditions  will  be  twenty-five  years  from  now,  I  do 
not  know,  but  I  hope  and  believe  that  they  will  be  more  favor- 
able for  municipal  enterprises.  In  the  meantime  I  am  willing 
to  let  the  private  corporations  take  the  risks  and  the  profits 
wherever  they  can  and  will  give  reasonable  rates  and  good  serv- 
ice. 

Quarterly   Review.  209:  409-31.  October,   1908. 

^^lunicipal  Trade.     Leonard  Darwin. 

IMr.  Bernard  Shaw,  in  his  'Common  Sense  of  jMunicipal 
Trading'  (p.  3),  tells  us  that  'the  central  commercial  fact  of 
the  whole  question"  is  that  cities  can  raise  money  at  low  rates 
of  interest,  and  that  consequently  the  citizen,  'by  municipal  trad- 
ing, can  get  his  light  for  the  current  cost  of  production  plus  a 
rate  of  interest  which  includes  no  insurance  against  the  risk 
of  loss,  because  the  security'  is  practically  perfect.  Prices  in 
municipal  trade  can  therefore,  so  it  is  urged,  be  reduced  below 
the  level  of  prices  in  private  trade.  This  is.  no  doubt,  a  view 
commonly  held  by  sensible  persons,  and  it  may  on  that  ground 
be  described  as  the  common-sense  of  municipal  trading.  But 
if  it  is  widely  accepted,  it  is  so  not  because  it  is  accurate,  but 
because  the  underlying  fallacy  is  not  easily  exposed.  Is  it 
right,  it  should  in  the  first  place  be  asked,  that  a  municipality 
should  make  'no  insurance  against  loss'  out  of  the  profits  of 
any  industry  it  may  manage?  Every  commercial  venture  is  not 
a  success ;  and  losses  are  inevitable  if  a  city  enters  extensively 
into  such  enterprises.  Out  of  the  profits  of  successful  ventures, 
such  as  gas-works,  an  insurance  fund  ought  therefore  to  be 
created  to  cover  losses  in  unsuccessful  ventures,  such  as  the 
London  steamboats ;  for,  if  this  is  not  done,  these  losses  may 
have  to  be  met  by  additional  taxation.     No  doubt  most  munic- 


124  SELECTED    ARTICLES 

ipal  trades  are  monopolies,  in  which  case  the  city  has  generally 
the  option  of  raising  prices  as  an  alternative  method  of  meet- 
ing a  loss. 

Taxes  Increased. 

It  is  obvious,  therefore,  that  in  order  to  estimate  the  imme- 
diate increase  of  taxation  likely  to  fall  on  the  citizens  of  a  city 
municipalising  any  industry,  the  probable  net  loss  in  cash  must 
first  be  estimated ;  and  to  this  must  be  added  an  estimate  of 
the  rent  which  would  be  drawn  from  the  private  proprietors  of 
the  industry  if  it  were  not  municipalised.  In  fact  a  careful  study 
of  these  returns  indicates  that  an  increase  of  taxation  is  the 
probable  immediate  result  of  municipal  trade,  though  it  is  a 
result  which  the  citizens  concerned  may  never  perceive. 

Municipal  Employment  Costly. 

To  discuss  in  detail  all  the  reasons  why  the  direct  employ- 
ment of  labour  by  municipalities  is  likely  to  be  costly  would 
occupy  many  pages.  But  an  analysis  of  these  reasons  indicates 
that  they  are  based  on  a  few  broad  underlying  considerations 
which  may  be  briefly  stated  here.  In  the  hrst  place,  the  mu- 
nicipal workman  often  has  a  vote  in  the  district  in  which  his 
work  lies,  and  thus  gains  a  voice  in  the  selection  and  rejection 
of  his  masters,  the  members  of  his  town  council — a  privilege 
not  enjoyed  by  any  private  workman.  This  is,  no  doubt,  the 
basis  of  the  socialistic  claim  that  the  civic  employe  is  certain  to 
be  well  treated.  But  it  also  indicates  the  probability  that  work- 
men in  public  employment  will  be  paid  wages  above  the  mar- 
ket level,  that  less  w^ork  will  be  demanded  of  them  in  a  given 
time,  that  discipline  will  be  less  efifectively  maintained,  and 
that  for  these  reasons  the  cost  of  production  will  be  greater 
in  municipal  than  in  private  trade.  In  the  second  place,  the 
stimulus  of  personal  gain  is  almost  inoperative  in  municipal 
trade,  whilst  that  same  stimulus  animates  private  trade  in  ways 
too  numerous  here  to  be  mentioned,  thus  making  private  trade 
more  progressive  than  municipal  trade — more  progressive, 
that  is,  in  cases  where  financial  success  is  probable.  In  a  district 
where  the  profitable  working  of  a  tramway  is  improbable,  it  may 


MUNICIPAL  OWNERSHIP  125 

be  that  it  is  more  likely  to  be  constructed  by  town  councillors 
than  by  company  directors,  because  the  local  authorities  are  un- 
restrained by  that  excellent  commercial  brake,  the  fear  of  person- 
al loss. 

Corruption. 

It  is  perhaps  unfortunate  that  the  question  whether  munici- 
pal trade  pays  or  not  necessarily  forms  such  a  large  part  of 
this  controversy,  because  no  doubt  in  many  matters  other  con- 
siderations are  more  important  than  those  concerning  finance. 
Cities  may  be  right  to  face  losses  when  those  losses  are  in- 
curred for  the  general  good ;  and  the  management  by  local  au- 
thorities of  roads,  waterworks,  baths,  slaughter-houses,  ceme- 
teries, harbours,  etc.,  when  these  services  are  unremunerative, 
may  in  many  cases  be  justified  on  this  plea.  But  to  impose 
additional  taxation  merely  for  the  sake  of  encouraging  the  di- 
rect employment  of  labour  cannot  thus  be  justified,  for  the  result 
would  be  to  benefit  a  class  and  not  the  whole  community.  In 
fact,  as  regards  society  generally,  direct  employment  is  the  re- 
verse of  a  benefit,  because  the  germs  of  corruption  undoubtedly 
exist  in  our  cities,  and  the  probability  of  the  disease  spreading 
is  greatly  increased  if  large  numbers  of  employes  are  brought 
under  the  direct  authority  of  the  civic  authorities.  This  is  by 
far  the  strongest  argument,  not  necessarily  against  municipal 
ownership,  but  against  the  direct  employment  of  labour  by  civic 
authorities.  On  this  subject  the  United  States  is  often  held  up  as 
a  warning  in  indicating  the  depths  of  corruption  into  which  Eng- 
lish-speaking cities  may  fall,  and  of  the  difficulty  of  extricating 
them. 

World   To-Day.   1*2:   621-5.  June,   1907. 

Municipal  Ownership  of   Public  Utilities.     John  W.   Hill. 

All  the  arguments  that  can  be  made  for  municipal  owner- 
ship and  operation  of  public  utilities  can  be  made  against  it, 
with  the  additional  argument  that  the  very  highest  measure  of 
success  in  business  management  has  been  attained  in  private  or 
quasi-public  enterprises  ;  and  this  will  always  be  so,  so  long  as 
we  live  under  a   form  of  government   subject  to   frequent   elec- 


126  SELECTED   ARTICLES 

tions,  spasmodic  reforms  and  the  lifting  into  office  of  many- 
men,  often  unfitted  to  conduct  with  success  the  commonest  af- 
fairs of  life.  Municipal  ownership  means  the  conduct  of  pub- 
lic utilities  by  men  whose  chief  and  sometimes  only  claim  to 
consideration  is  the  fact  that  they  received  more  votes  than 
their  opponents  at  the  last  election. 

Unless  all  men  are  capable  of  managing  public  utilities,  mu- 
nicipal ownership  and  operation  in  principle  is  bound  to  be  a 
failure,  because  any  man  may  by  the  votes  of  his  friends  be  sud- 
denly thrust  into  an  office  which  will  require  him  to  assume 
the  management  of  enterprises  calling  for  technical  skill  and 
experience ;  and  herein  lies  the  danger  to  public  interests,  be- 
cause the  staff  can  not  be  any  better  "than  its  head,  and  under 
the  withering  and  degrading  influence  of  partisan  politics  is  often 
worse  than  the  head. 

Political  appointments  are  to  be  condemned,  because  they  are 
political  appointments,  and  not  because  of  inherent  objection 
to  the  man  appointed,  for  no  matter  how  great  his  talents,  or 
how  evident  his  fitness  for  the  work  assigned,  the  knowledge 
that  his  appointment  is  due  to  political  influence  rather  than 
to  recognition  of  merit,  will  clog  his  efforts  and  weaken  his  am- 
bition, and  the  constant  feeling  of  insecurity  connected  with 
public  office  will  chill  his  ardor  and  shorten  his  reach. 

All  public  utilities  begin  with  plans  and  construction  work. 
and  here  arises  the  first  economy  in  favor  of  private  owner- 
ship. In  organizing  the  staff  to  design  and  build,  merit  and 
efficiency  alone  are  considered,  political  considerations  do  not 
enter,  and  each  man  is  selected  and  each  move  made  to  secure 
the  largest,  quickest  and  safest  return  for  the  money  expended. 
In  private  enterprises  promises  for  efficient  service  can  be  made 
and  the  incentive  to  active  and  successful  effort  can  be  main- 
tained. Civil  service  rules  which  are  often  a  bar  to  high  achieve- 
ment and  practical  ability  in  municipal  enterprises  seldom  find 
place  in  private  work.  A  competent  official  is  recognized  and 
awarded  even  though  his  knowledge  of  Greek  and  grammar  is 
not  of  a  high  order,  and  the  adjustment  of  the  members  of 
the  working  staff  to  the  positions  of  greatest  usefulness  is  sure 
and  easy  under  private  management. 


MUNICIPAL   OWNERSHIP  127 

The  writer  at  one  time  had  occasion  to  seek  the  services  of 
a  competent  transitman  in  tunnel  work;  several  candidates 
were  highly  recommended  for  the  place  by  the  City  Civil  Service 
Commission,  who,  when  put  to  work,  succeeeded  indifferently 
well.  Finall}^  a  man  of  large  practical  experience  in  coal-mine 
surveying,  but  with  a  poor  record  from  the  Civil  Service  ex- 
amination, was  employed  for  the  duty,  with  marvelous  results 
in  the  speed  and  accuracy  of  his  work.  This  man  had  grown 
up  in  the  coal  mines,  had  learned  to  handle  a  transit  and  level  as 
a  forester  learns  to  handle  an  ax,  with  only  the  rudiments  of 
trigonometry  at  command  and  wholly  unable  to  explain  on  paper 
the  usual  adjustments  of  field  instruments,  but  he  was  as  sure 
in  his  work  under  ground  as  if  it  was  second  nature.  He  made 
good,  notwithstanding  his  failure  to  show  a  satisfactory  record 
on  Civil  Service  examination,  but  it  was  only  by  violating  the 
Civil  Service  rules  with  regard  to  appointments  in  the  city 
service  that  his  talents  became  available."  In  a  private  enter- 
prise his  record  of  past  experience  and  recommendations  would 
have  secured  a  place  for  him. 

Freedom  of  action  in  choosing  one's  assistants  seldom  pre- 
vails in  the  conduct  of  municipal  bureaus.  Eminent  talents  are 
rarely  known  and  seldom  sought  for  among  the  employees  of 
municipalities,  because  the  term  of  office  is  short  or  uncertain 
and  the  encouragement  to  lofty  and  persistent  effort  corres- 
pondingly lacking. 

In  organizing  a  municipal  staff,  the  first  consideration  is  po- 
litical service  and  availability  for  future  political  ends.  A  ward 
captain  will  usually  rank  higher  in  the  estimation  of  the  appoint- 
ing power  than  an  experienced  mechanic,  engineer,  clerk  or  ac- 
countant, and  utility  and  fitness  for  the  task  assigned  is  a  sec- 
ondary consideration,  and  too  frequently  not  a  consideration  at 
all.  Under  such  conditions  public  service  is  perfunctory,  dila- 
tory and  inefficient,  the  cost  of  service  is  enhanced,  and  the  com- 
fort and  convenience  of  the  pubHc  impaired. 

This  is  not  necessarily  due  to  inherent  defects  or  incompe- 
tency in  the  individual  appointee,  but  to  a  pernicious  feature  of 
American  municipal  government,  which  makes  merit  and  fitness 
for  service  take  second  place  to  influence  and  patronage.     Under 


128  -  SELECTED    ARTICLES 

-such  conditions  any  part  of  a  public  service  which  depends  upon 
manual  labor  or  human  skill  must  be  obtained  at  an  increased 
cost  over  the  same  service  from  a  system  which  knows  neither 
influence  nor  patronage,  and  which  marshals  its  employees  ac- 
cording to  merit  and  fitness  for  the  duty  assigned. 

In  organizing  a  working  staff  for  a  private  corporation,  the 
fewest  men  consistent  with  the  work  to  be  performed  are  se- 
lected, and  effort  is  always  made  to  bind  them  by  feelings  of 
self-interest  to  the  enterprise,  and  retain  them  indefinitely,  be- 
cause their  experience  becomes  a  valuable  working  asset  of  the 
corporation,  which  can  not  readily  be  replaced  on  short  notice. 
No  such  conditions  can  prevail  in  public  affairs  because  the  man 
at  the  top  is  himself  a  creature  of  chance  or  caprice,  and  his 
tenure  is  subject  to  the  whims  of  the  people  who  elevated  him 
to  office.  He  can  not  guarantee  a  term  to  his  subordinates  be- 
cause of  political  expediency  and  his  own  uncertain  base,  and 
the  fidelity  of  service  which  comes  from  respect  for  vested  au- 
thority, and  the  skill  and  command  of  his  superior,  can  rarely  be 
inspired  in  employees  on  municipal  work. 

In  the  making  of  contracts  and  purchase  of  supplies  for 
public  utilities  the  private  corporations  have  a  decided  advantage. 
The  usual  restrictions,  hindrances,  circumlocution  and  indirect- 
ness of  methods  forced  by  law  and  ordinances  in  public  con- 
tracts and  purchases  of  materials  are  swept  aside  in  private  en- 
terprises, and  the  object,  whatever  it  is,  is  sought  by  direct 
methods  guided  by  intelligence  of  purpose. 

Contracts  for  public  works  are  so  hampered  by  "safeguards" 
and  by  restrictions,  that  an  experienced  and  conscientious  con- 
tractor is  bound  to  protect  his  interests  b}' demanding  prices  above 
those  he  would  ask  for  the  same  kind  of  work  from  individuals 
and  private   corporations. 

The  exercise  of  judgment  and  sense  of  fair  dealing  which 
prevails  between  men  of  honor  and  mental  ability,  can  not 
prevail  with  the  municipal  officers  and  the  contractor.  The  mu- 
nicipal contract  is  an  inflexible  instrument,  open  to  only  one 
construction,  and  that  the  construction  put  upon  it  by  the  officer 
himself. 

Contracts    made    by    private    corporations    go    direct    to    the 


MUNICIPAL   OWNERSHIP  129 

three  material  points:  i. — Kind  and  quality  of  work.     2. — Time 
of  performance.     3. — Price  and  terms  of  payment. 

Contracts  with  private  corporations  are  treated,  as  they 
should  be,  as  commercial  transactions  subject  to  their  laws  and 
customs,  and  free  from  the  taint  of  political  or  any  sinister  in- 
fluence. Differences  between  the  buyer  and  seller  on  quality 
-and  price  of  work  are  quickly  and  fairly  compromised,  and  as 
a  rule  work  on  the  private  contract  is  in  progress  before  the 
municipal  contract  has  completed  its  travels  around  the  offices 
which  by  law  are  required  to  participate  in  its  execution.  The  red 
tape  connected  with  the  letting  and  award  of  public  contracts  in- 
volves delay  and  expense  which  the  bidder  is  bound  to  con- 
sider in  making  his  prices  for  the  work. 

Private  inspection  and  measurement  of  work  is  usually  exact, 
without  being  captious,  and  the  delay  due  to  the  list  of  officials 
who  must  be  seen  before  difficulties  can  be  met  and  overcome  in 
public  work  are  not  encountered  in  private  work,  because  some 
one  in  whom  his  employers  have  confidence  is  vested  with  au- 
thority to  act,  and  his  acts  are  by  law  the  acts  of  his  principals. 
In  public  affairs  it  is  often  a  matter  for  the  courts  to  decide  as 
to  who  really  has  the  authority  to  resolve  disputed  and  trouble- 
some  conditions   of   municipal   contracts. 

Political  and  usually  incompetent  inspectors  and  inexperi- 
enced managers  are  the  rule  on  public  contracts,  while  a  private 
corporation,  from  the  necessity  of  conserving  its  capital,  must 
have  competent  men  to  manage  its  work  and  avoid  losses  due 
to  mistakes  of  judgment  or  errors  of  inexperience.  Time  and 
cost  alike  are  essential  elements  of  private  corporations,  be- 
cause returns  are  sought  for  at  the  earliest  convenient  date,  while 
public  enterprises  are  usually  conducted  with  small  regard  of 
time  and  less  regard  of  cost. 

As  a  personal  conviction,  I  think,  the  less  the  larger  munic- 
ipal corporations  engage  in  lines  of  business  which  can  be  con- 
ducted by  private  corporations,  the  better  it  will  be  for  the  pub- 
lic at  large.  There  is  more  need  of  coffee  and  sugar  in  a  mu- 
nicipality than  there  is  of  trolley  cars  and  electric  lighting.  But 
no  one,  not  even  our  most  aggressive  demagogues,  has  pro- 
posed  to   establish   a   municipally   owned   and   operated   grocery 


130  SELECTED    ARTICLES 

store,  but  it  may  come  to  this  in  time,  when  the  men  who  purvey 
our  real  necessities  of  life  will  be  political  partisans  imbued  with 
the  spirit  of  political  success,  rather  than  with  the  desire  to  cul- 
tivate and  secure  the  good  will  of  their  patrons. 

It  is  proper  that  the  bent  of  an  enterprise  or  monarchy  should 
be  paternal,  because,  as  a  sentiment  at  least,  everything  and  all 
avenues  of  progress  start  from  a  common  center  at  the  head 
of  the  government.  Paternalism,  however,  is  neither  desirable 
nor  possible  in  a  republican  form  of  government  where  the 
officials  from  the  President  downward  in  the  scale  are  chosen  for 
a  brief  time  as  executives  of  public  will,  and  with  an  opportunity 
too  limited  to  admit  of  permanently  fixing  the  stamp  of  indi- 
vidual ideas  on  public  affairs. 

The  best  service  is  rendered  when  there  is  hope  of  reward, 
and  the  best  commodity  produced  where  there  is  hope  of  profit. 
Where  reward  and  profit  are  lacking,  service  and  commodity 
depreciate  in  value.  The  rewards  of  political  life  are  dubious 
and  ephemeral,  and  the  profits  are  not  forthcoming  by  honest 
ways.  All  these  things  go  to  make  municipal  ownership  of  pub- 
lic utilities  an  undesirable  end.  The  losses  due  to  extravagance 
and  misdirected  efforts  of  municipal  bodies  will  represent  enor- 
mous dividends  on  properly  applied  capital,  and  when  it  is  con- 
sidered that  any  municipal  work  can  be  built  and  operated  at 
less  cost  by  private  corporations  than  by  public  corporations, 
it  is  a  marvel  how  intelligent  people  can  be  hoodwinked  into 
the  support  of  the  popular  and  irresponsible  clamor  for  the 
conduct  of  public  utilities  by  municipal  officials. 

A  case  in  point  on  one  of  the  impediments  to  an  award  of 
municipal  contracts  is  worth  consideration.  In  a  city  contract 
involving  nearly  eight  hundred  thousand  dollars'  worth  of  work 
and  materials,  the  lowest  bidder,  a  thoroughly  responsible  party, 
was  somewhat  ambiguous  in  stating  his  prices  on  certain  items, 
and  to  guard  against  error,  he  was  asked  to  explain  the  intended 
scope  of  the  doubtful  prices  written  in  his  proposal,  and  upon 
reducing  his  explanation,  which  was  satisfactory,  to  writing,  his 
proposal  was  accepted. 

A  disappointed  competitor  prayed  for  an  order  of  court  re- 
straining the  director  of  public  works   from  executing  the  con- 


MUNICIPAL   OWNERSHIP  131 

tract  because  of  irregularity  in  making  the  award.  The  prayer 
was  granted  and  the  director  ordered  to  reject  all  bids  and  re- 
advertise  the  contract,  causing  several  weeks'  delay,  during 
which  interval  of  time  prices  of  materials  were  advanced  and 
the  cost  o[  the  work  accordingly  increased. 

The  court,  in  this  case,  held  that  the  director  had  no  right, 
prior  to  award  of  contracts,  to  confer  with  the  lowest  and  ap- 
parently best  bidder  upon  the  contents  of  his  proposal,  as  to  the 
amount  of  labor  and  material  embraced  in  the  price  of  one  or 
two  of  the  many  items ;  that  it  gave  the  bidder  an  unfair  ad- 
vantage over  his  competitors  notwithstanding  under  the  law 
and  customs  of  the  department  he  was  the  lowest  and  best  bidder. 
The  court  held  that  the  award  of  a  public  contract  was  not  sub- 
ject to  the  business  and  common-sense  judgment  of  the  director, 
but  was  a  simple  problem  of  arithmetic  which  could  be  solved 
by  any  clerk  in  the  director's  office. 

The  opinion  of  the  court  cost  the  city  many  thousands  of 
dollars  and  weeks  of  delay,  and  was  thought  by  the  director  and 
his  advisers  to  be  unsound  in  law  and  logic.  But  it  was  the 
opinion  of  a  court,  and  as  such  had  to  be  respected. 

No  such  foolishness  could  arise  in  disposing  of  a  list  of  tend- 
ers on  a  private  contract,  for  only  such  people  would  be  invited 
to  bid  as  could  certainly  comply  with  the  requirements  of  the 
contract.  Personal  interests  would  have  no  weight  in  making^ 
the  award.  Quality  of  work,  guarantees,  and  time  of  perform- 
ance and  price  alone  would  be  considered,  and  no  reasonable 
ground  would  be  afforded  for  complaint  on  the  part  of  the  dis- 
appointed bidders.  The  buyer  would  seek  the  best  article  at  the 
lowest  price,  unrestricted  by  the  usual  municipal  conditions  cal- 
culated to  hamper  his  decision  and  thwart  his  judgment. 

The  faults  of  municipal  contracts  are  not  due  so  much  to  mis- 
management as  to  the  multitude  of  conditions  to  be  met  before 
a  contract  can  be  made,  and  the  troublesome  restrictions  placed 
upon  its  performance  after  it  is  made.  It  can  not  be  gainsaid 
that  the  private  corporation  can  buy  the  same  thing  at  a  better 
price  and  upon  better  terms,  and  can  adjust  disputed  points  of 
performances  more  quickly  and  satisfactorily  than  can  a  munici- 
pal corporation.     The  parties  can  go  at  once  to  the  gist  of  the 


132  SELECTED    ARTICLES 

difficulties  and  adjust  them  according  to  the  judgment  of  intelli- 
gent  and   experienced   arbitrators. 

While  private  corporations  are  organized  and  operated  for 
profit,  and  always  have  profit  in  view,  the  service  rendered 
should  be  better  and  rates  charged  be  more  reasonable  than  the 
service  and  rates  of  a  municipal  corporation  which  attempts  to 
perform  the  same  work  or  furnish  the  same  commodity. 

If  faults  are  found  in  the  service  or  charges  of  private  corpo- 
rations, the  cause  should  be  looked  for  in  the  ordinances  or  laws 
granting  the  franchises,  rather  than  in  the  management  or 
operation  of  the  private  corporation. 

The  city  of  Philadelphia  for  years  owned  and  operated  a 
municipal  gas-works,  which  eventually  became  an  asylum  for 
broken-down  political  heelers,  and  for  some  who  were  not 
broken  down.  The  evils  of  municipal  control  shown  in  the  poor 
quality  of  gas,  indifferent  and  slovenly  service,  high  prices,  and 
large  annual  losses  in  the  operation  of  the  works,  became  so 
great  that  many  of  the  people  of  this  truly  good  (?)  town, 
prayed  that  some  one  might  be  permitted  to  take  the  city  gas- 
works from  municipal  control,  even  if  they  had  to  steal  it,  and 
thus  get  rid  of  an  incubus  which  poHtical  inefficiency  and  greed 
had  fastened  upon  them. 

In  course  of  time,  the  gas-works  w^ere  leased  to  a  great  and 
powerful  company  which  shortly  overcame  all  the  difficulties 
formerly  surrounding  the  municipal  gas-works,  and  gave  to 
the  people  better  service  at  lower  prices,  in  addition  to  making 
an  annual  payment  to  the  municipal  sinking  fund  of  several 
hundred  thousand  dollars,  increasing  from  year  to  year,  which 
was  used  to  extinguish  the  overwhelming  debt  created  by  muni- 
cipal control  of  the  institution. 

A  certain  city  in  the  United  States  was  about  to  construct 
large  and  necessary  improvements  in  its  water-works,  after  plans 
and  estimates  had  been  prepared  by  engineers  not  under  munici- 
pal control.  A  syndicate  of  capitalists  agreed  to  construct  the 
works  within  the  estimate  of  cost  and  time.  It  was  found,  how- 
ever, that  the  law  would  not  permit  of  the  construction  in  this 
way,  and  that  the  work  must  be  carried  out  under  the  manage- 
ment of  the  municipality,  with  the  natural  result  that  the  cost 


MUNICIPAL    OWNERSHIP  133 

has  been  exceeded  by  nearly  seventy  per  cent  and  the  time  ex- 
ceeded by  one  hundred  per  cent,  with  the  works  unfinished  to- 
day. The  parties  who  proposed  to  perform  the  work  were  men 
,  who  had  driven  railroads  over  mountains,  across  broad  rivers, 
and  through  the  trackless  wilderness,  who  know  the  exact  value 
of  materials  and  labor,  and  how  to  obtain  the  best  results  at  the 
lowest  prices,  and  who  could  not  afford  to  tolerate  extravagance 
or  delay,  because  their  profit  depended  upon  quickness  of  action 
and  certainty  of  results. 

Extortion  by  private  corporations  should  not  be  tolerated, 
and  a  reasonable  appeal  to  the  courts  can  be  relied  upon  to  pre- 
vent or  remedy  this.  Public  utilities  under  private  control  should 
be  allowed  an  income  which  will  represent  a  reasonable  profit 
on  just  capitalization  and  honest  and  efiicient  management,  and 
more  than  this  can  not  be  obtained,  if  the  people  are  alive  to 
their  interests.  It  is  always  possible  to  compel  satisfactory  serv- 
ice at  reasonable  prices  from  private  interests,  and  no  one  ap- 
preciating the  value  of  his  property  can  afiford  to  antagonize 
the  people  upon  whose  good  will  and  patronage  his  success  de- 
pends. 

North  American   Review.   182:  853-6a  June,   1906. 

Arguments  against  Municipal  Ownership.     F.  B.  Thurber. 

There  are  two  sides  to  most  questions,  and  municipal  owner- 
ship is  no  exception  to  this  rule.  There  are  situations  in  coun- 
tries having  a  form  of  government  different  from  ours,  where 
graft  is  not  an  epidemic  disease,  and  where  public  ownership 
and  operation  may  be  successful ;  but  even  there  opinions  differ. 
In  Great  Britain  it  has  run  its  course,  and  there  is  a  reaction  in 
public  opinion  against  "municipal  trading."  as  it  is  called  there, 
just  at  a  time  when  many  well-meaning  persons  in  this  country, 
as  well  as  professed  Socialists  and  their  organs,  are  advocating 
it  here. 

In  a  country  with  universal  suffrage,  it  is  desirable  to  limit 
the  number  of  public  officials  to  the  smallest  possible  number, 
for  political  reasons;  and  there  are  also  economic  reasons  which 
apply    especially    to    lighting,    traction    and    other    public-service 


u- 


134  SELECTED    ARTICLES 

corporations  which  are  large  buyers  of  materials,  employ  large 
numbers  of  persons  and  require  a  high  order  of  administrative 
ability.  Indeed,  water,  a  natural  product,  which  runs  down-hill 
and  is  distributed  with  a  minimum  of  labor  and  expense,  is  about 
the  only  public  necessity  justifying  public  ownership  in  this 
country,  and  even  in  this  there  are  exceptions. 

Nothing  can  be  truer,  as  a  rule,  than  that  "public-ownership 
waste  exceeds  corporate  profit" ;  supplement  this  with  the  even 
more  important  political  considerations,  and  thoughtful  citizens 
may  well  hesitate  to  favor  the  present  Socialistic  fad  of  municipal 
ownership.  It  advocates  play  upon  public  prejudice,  and  claim 
economies   for  public  ownership  which  do  not  exist. 

Public  officials  where  municipal  plants  have  been  established 
are  naturally  interested  in  making  a  good  showing  and  holding 
their  easy  jobs ;  in  many  instances,  their  bookkeeping  omits 
interest,  taxes,  depreciation.  sinking>fund  for  renewals  or  im- 
provements, and  other  item^  which  a  private  corporation  must 
recognize.  The  taxpayer  is  a  convenient  beast  of  burden  upon 
which  to  unload  deficits,  and  he  in  turn  unloads  on  rentpayers 
where  he  can.  Under  public  ownership,  new  inventions,  im- 
provements and  extensions  are  ignored.  Under  private  owner- 
ship, the  best  professional  talent  is  employed  at  salaries  unheard 
of  in  public  employment,  and  all  these  improvements  are  at 
once  utilized,  giving  the  public  an  up-to-date  service. 

Individual  initiative  and  energy,  coupled  with  the  cooperation 
of  many  small  partners  in  corporations,  has  made  this  country 
great ;  and  I  cannot  believe  that  the  municipal  Socialistic  propa- 
ganda will  largely  prevail  if  the  facts  are  properly  presented 
to  the  jury  of  American  public  opinion. 

As  illustrative  of  the  above  points,  I  cite  a  few  opinions  of 
others,  taking  up  first : 

Political  Objections. 

"The  Evening  Post"  (New  York)  of  March  8th.  1905,  in 
an  editorial  on  the  strike  in  the  Subway  and  on  the  Elevated 
Railway,  entitled  "Some  Lessons  of  the  Strike,"  said : 

"Nor  can  we  omit  to  point  the  warning  which  the  strike 
furnishes  against  municipal  ownership  of  a  great  transport  sys- 
tem. One  thing  which  the  infatuated  strike-leaders  have  steadily- 
counted  upon   is  Mr.   Belmont's   political   involvements.     Thev  have 


MUNICIPAL   OWNERSHIP  135 

repeatedly  raided  him  in  the  confidence  that  he  dared  not  antag- 
onize 7,000  voters.  Now,  imagine  the  city  itself — that  is,  a  Mayor 
standing  for  reelection — running  all  the  transportation  lines. 
Fancy  12,000  or  20,000  motormen  and  conductors  directly  in  the 
pay  of  the  municipality.  What  demands  should  we  not  see  made, 
what  threats  indulged  in,  what  political  appeals  made  and  terror- 
ism exerted!  From  what  is  going  on  ill  the  green  tree  of  ownership 
by  a  politician,  we  may  infer  what  would  be  done  in  the  dry  tree 
of  ownership  by  an  Administration  dependent  on  universal  suf- 
frage. W^e  had  best  look  twice  at  that  fire  before  jumping  into  it 
out  of  our  present  frying-pan." 

The  "Chicago  Evening  Post''  of  September   15th,   1905,  in  an 

editorial    entitled    '"The    Bridgetender's    Rake-off."    shows    how 

municipal   ownership   and   operation   work   in    Chicago.     It   said : 

"As  the  taxpayer  reads  the  facts  and  figures  presented  by  the 
'Evening  Post'  of  yesterday  regarding  the  salaries  paid  to  the 
city  bridgetenders,  he  will  be  particularly  impressed  by  the  'rake- 
off'  that  goes  to  the  occupants  of  these  'soft  snaps' — the  amount 
of   money   drawn   from   the   city   treasury   that    is   not   earned. 

"The  taxpayer  who  knows  little  about  practical  politics  will 
wonder  why  a  man  should  be  paid  $3,400  a  year  to  look  after  a 
bridge,  pay  out  about  half  of  this  to  have  tlie  work  done,  pocket 
the  other  half  and  devote  his  time  to  running  a  saloon  or  some 
other  purely  private  matter.  He  will  marvel  that  a  bridgetender, 
who  at  most  is  nothing  but  a  motorman,  should  draw  several 
times  a  motorman's  pay,  yet  do  no   part  of  a  motorman's  work. 

"There  is  not  a  bridge  in  Chicago  that  should  not  be  handled 
at  an  outside  cost  of  $3,000  a  year — considering  that  three  or 
four  months  the  work  of  attending  to  bridges  is  merely  nominal. 
It  has  been  shown  that  one  bridgetender  is  clearing  $155  a  month 
out  of  his  $2,700  salary:  another  is  pocketing  $1,840  a  year  out  of 
$3,400:  still  another  is  netting  fully  $1,000  annually  out  of  his 
$283.33   a   month. 

"This  is  a  reckless  way  to  play  with  the  people's  money. 
Even  the  city  authorities  who  are  responsible  for  the  salaries  and 
the  selection  of  the  men  to  whom  they  are  paid  show  they  are 
ashamed  of  the  whole  'grafting'  business  by  their  reluctance  to  let 
the   people  scrutinize   the   bridgetenders'    pay-roll. 

"The  shameful  condition  so  fully  exposed  by  the  'Evening 
Post'  should  be  changed  without  delay.  The  Mayor  and  City  Coun- 
cil ought  to  join  hands  in  a  bit  of  reform  that  would  be  im- 
mediately to  the  benefit  of  the  public  treasury.  The  Mayor  should 
limit  the  number  of  bridgetenders  to  actual  requirements,  and 
he  should  see  that  every  man  earns  his  pay.  The  Council  should 
limit  the  appropriation  for  this  work,  so  as  to  leave  no  opportu- 
nity for  grafting. 

"The  bridgetender  should  be  required  to  attend  to  bridges, 
to  look  after  them  thoroughly.  He  should  have  no  time  for  prac- 
tical politics  or  for  running  a  saloon.  And  for  this  work,  faith- 
fully  done,    he    should    receive   a    fair    salary. 

"Stop  this  bridgetender's  graft.  Cut  out  the  practical  politi- 
cian's rake-off.  Mayor  Dunne,  who  proposes  to  bring  the  street 
railroads  under  the  same  management  as  the  city  bridges,  should 
be  particularly  anxious  first  of  all  to  reform  this  especially  glaring 
evidence  of  loose   municipal   operation." 

As  illustrating   how   persons   who   know   only   one   side   of   a 

question    change    their    minds    after    seeing   the    other    side,    the 


136  SELECTED    ARTICLES 

following  editorial,  entitled  "The  Conversion  of  the  Scot,"  from- 
the  "New  York  Times"  of  June  15th,  1905,  is  pertinent: 

"Mr.  James  Dalrymple,  Glasgow's  managing  expert  of  tram- 
ways, hailed  and  imported  by  the  'Lord  Mayor'  of  Chicago  and  the 
Municipal  Ownership  League  of  New  York  as  the  high  apostle  of 
municipal-run  street  railways,  has  experienced  a  conversion  and 
given  his  adorers  a  chill.  His  change  of  prospect  from  the  fair 
municipal  landscape  of  Glasgow  to  the  political  bogs  and  quagmires 
of  Chicago  is  marked  by  the  following  two  utterances,  the  first 
delivered  just  after  Mr.  Dalrymple  landed  and  was  hugged  by  the 
Leaguers  in  this  city,  the  other  on  his  way  back  on  Tuesday  via 
Philadelphia; 

BEFORE. 

"I  see  no  reason  why  Chicago,  or  any  other  city  in  this  country, 
should  not  be  able  to  own  its  street  railways,  and  to  run  them  with 
as  much  success  as  we  have  achieved  at  Glasgow.  I  admit  that 
the  proposition  at  Chicago  is  a  much  larger  one  than  the  one  we 
had-to  tackle,  but  at  the  bottom  it  is  the  same. 

"The  people  of  Glasgow  would  not  go  back  to  the  old  days  of 
private  ownership  for  anything  in  the  world.  I  am  not  saying  that 
a  company  would  not  do  as  well  by  the  public.  I  know,  in  fact, 
that  it  could,  but  it  would  be  doing  so  with  a  somewhat  different 
end  in  view.  For  a  company  has  always  the  shareholders  to  con- 
sider. And  I  have  to  admit  that  you  will  find  people  in  Glasgow 
to-day — quite  influential  people,  too — who  say  that  the  street-car 
service  is  not  profitable." 

AFTER. 

"To  put  street  railroads,  gas-works,  telephone  companies,  etc., 
under  municipal  ownership  would  be  to  create  a  political  machine 
in  every  large  city  that  would  be  simply  impregnable.  These  po- 
litical machines  are  already  strong  enough  with  their  control  of 
policemen,   firemen,  and  other  office-holders. 

"If,  in  addition  to  this,  they  could  control  the  thousands  of  men 
employed  in  the  great  public-utility  corporations,  the  political  ma- 
chines would  have  a  power  that  could  not  be  overthrown.  I  came 
to  this  country  a  believer  in  public  ownership.  "What  I  have  seen 
here,  and  I  have  studied  the  situation  carefully,  makes  me  realize 
that  private  ownership  under  proper  conditions  is  far  better  for 
the  citizens  of  American  cities." 

Economic  Considerations. 

'  The  experience  of  the  City  of  Philadelphia  with  her  gas- 
works is  interesting,  because  she  has  both  operated  and  leased 
them ;  and  the  results  have  a  bearing  upon  both  the  political  and 
economic  phases  of  this   subject. 

For  man}-  years,  the  city  owned  and  operated  its  gas-works, 
with  the  result  of  high  prices,  poor  service  and  the  gradual  de- 
velopment of  a  political  ring  which  robbed  the  city  and  prac- 
tically -dominated  its  politics.  This  grew  so  intolerable  that, 
ten  years  ago,  the  works  were  leased  to  the  United  Gas  Improve- 
ment Company.  Hays  Robbins,  in  an  article  in  the  "World  of 
To-day,"  December,  1904,  says: 


MUNICIPAL   OWNERSHIP  137 

"During  the  late  seventies  and  early  eighties,  the  waste  and 
mismanagement  under  this  [municipal  operation]  system  became 
so  scandalous  that  public-spirited  citizens,  notably  the  well-re- 
membered Committee  of  One  Hundred,  dared  the  power  of  the  gas 
ring  and  fearlessly  exposed  its  shameful  record.  Professor  Bryce 
says  that  this  ring  controlled  no  less  than  20,000  votes,  using  them 
most   effectively   to   prolong  its   corrupt   rule." 

The  result  of  the  lease  to  the  United  Gas  Improvement  Com- 
pany has  been  to  improve  the  service,  lower  the  price  and  give 
the  city  a  yearly  revenue  of  $650,000,  as  against  an  average 
yearly    deficit   under   city   management   of   $239,000. 

The  candle-power  under  city  management  averaged  19.17; 
under  the  Company  management  it  has  averaged  22.88.  Thou- 
sands of  service  connections  which  w^ere  worn  out  or  inadequate 
in  size  to  supply  sufficient  gas  have  been  renew^ed,  convenient 
stations  for  the  payment  of  gas  bills  furnished,  and  the  plant 
brought  up  to  the  highest  efficiency. 

Btit,  while  accomplishing  this  great  gain  by  taking  the  gas- 
works out  of  politics,  the  city  did  not  entirely  escape  the  evils 
of  municipal  ring  rule  which  developed  in  other  directions,  and 
has  only  recently  been  broken  by  another  uprising  of  citizens. 
Some  people  have  inferred  that  the  recent  political  revolution 
in  Philadelphia  had  something  to  do  with  the  gas  business,  but 
it  was  only  in  the  sense  that  the  political  ring  controlling  the 
city,  needing  more  revenue  to  carry  on  extravagant  and  fraudu- 
lent public  improvements  which  they  had  inaugurated,  approached 
the  United  Gas  Improvement  Company  with  an  offer  to 
extend  their  lease^  provided  the  Gas  Company  w-ould  raise 
$25,000,000  for  the  ring  to  carry  on  the  city  improvements  which 
were  under  way.  After  a  long  negotiation,  the  Gas  Company 
consented  to  a  contract  which  good  judges  believe  would  (if 
the  money  could  have  been  honestly  expended)  have  been 
advantageous  to  the  city  as  well  as  to  the  Gas  Compan3^  But 
the  abuses  of  the  municipal  ring  had  become  such  a  stench  in 
the  nostrils  of  the  community  that  the  public  revolted  and  the 
ring  was  smashed.  So  far,  however,  as  the  relations  of  the  Gas 
Company  to  the  city  are  concerned,  they  have  been  entirely  satis- 
factory, and  it  will  be  a  sorry  day  for  Philadelphia  if  the  city 
should  resume  municipal  operation  of  its  gas-works.  Municipal 
owmership  is  one  thing,   municipal   operation  another. 

'The    Times"     (London)     recently    indicated    the    result    of 


138  SELECTED    ARTICLES 

municipal   ownership   and   operation   in    England,   in   a    series   of 
articles    under   the    title    of   "Municipal    Socialism.''    from    which 

the  following  paragraph  is  quoted: 

"Such  was  the  fashion,  however,  in  which  the  work  was  done 
that  it  was  aptly  described  by  one  alderman  as  'the  municipaliza- 
tion of  laziness.'  There  was  little  or  no  control  over  the  men,  with 
whom  it  was  essentially  a  case  of  'go  as  you  please.'  One  or  two 
members  of  the  Council  who  had  been  builders  went  one  day  to  see 
how  a  certain  work  was  progressing,  and  they  found  that  two  men 
had  been  for  three  weeks  on  a  job  which  one  man  ought  to  have  fin- 
ished in  three  days.  In  such  circumstances  as  these,  the  cost  of  work 
went  u:  necessarily.  The  work's  manager  estimated,  for  instance, 
that  certain  renovations  to  be  carried  out  in  the  Stratford  Town  Hall 
by  his  department  would  cost  nine  hundred  pounds  sterling;  but, 
though  nothing  more  was  done  than  he  had  allowed  for,  the  bill 
came  to  two  thousand  pounds  sterling." 

It  is  natural  for  public  officials  to  try  to  make  a  good  showing 
in  their  accounts  in  order  to  justify  themselves,  and  therefore 
many  items  which  private  corporations  have  to  recognize  are 
often  omitted.  How  it  w^orks  in  England  is  shown  by  Mr.  John 
Holt  Schooling,  an  eminent  authority,  in  the  "Windsor  Maga- 
zine," for  January,  1905.     The  following  is  a  summary : 

Undertaking.     No.  Capital.  Annual  Result    Claimed.         Correct    Result. 

Gas    97  £24,030,000  Gain,  £394,82-5         Loss,     £1,647,725 

Electricity   102  12,510,000  Gain,          11,707         Loss,        1,075,057 

Trams    45  9,750,000  Gain,          99,318         Loss,           729,432 

The   department  of  Commerce  and   La1:)or  of   the   United   States 

Government  has   issued   an   interesting   report   upon   the   relative 

expenses  of  private  and  municipal  electric  light  and  power  plants. 

The  year  covered  is  1902,  and  the  .figures  as  follow  : 

Private  Stations  Municipal  Stations 
Per  cent.  Per  cent. 

Salary  and   wages 29.9  35.8 

Supplies,    material    and    fuel 32.6  46.2 

Rent,  taxes,   insurance  and  miscellaneous...   18.2  8.4 

Interest    on   bonds 19.3  9.6 

Total     100  100 

Watered  Stock. 

A  principal  grievance  of  the  advocates  of  municipal  owner- 
ship is  that  private  corporations  water  their  stock;  and  that  this 
entails  an  additional  burden  upon  the  community.  While  this 
may  be  true  in  some  instances,  it  is  not  true  as  a  rule. 

The  Hon.  Chas.  G.  Dawes,  formerly  Comptroller  of  the  Cur-' 
rency.  well  summarizes  the  facts  in  the  following  words: 

"Stock  in  the  modern  corporation  represents,  not  only  owner- 
ship, but  the  location  of  control.  The  stockholders  of  a  corporation 
unanimously  desire  permanence  of  control  in  a  certain  set  of  men. 


MUNICIPAL   OWNERSHIP  139 

In  which  event  they  might  find  it  impracticable  to  liave  stock  is- 
sued only  in  an  amount  equal  to  the  cash  value  of  its  property. 
The  notion  that  stock  is  always-  watered  to  sell  or  to  perpetrate 
some  fraud  is  erroneous.  The  public  is  not  necessarily  injured  be- 
cause stock  at  par  does  not  always  represent  an  equal  amount  of 
cash    or    its    equivalent. 

"Varying  values  in  corporation  assets  are  reflected  in  the  selling 
or  market  value  of  the  stock — not  by  constant  alterations  in  the 
stock  issues  themselves.  Dishonest  men  may,  and  do  to  some  ex- 
tent, use  watered  stock  to  create  impressions  of  value  which  does 
not  exist;  but  the  abolishment  of  watered  stock  would  not  ma- 
terially hinder  them.  Wrong  impressions  and  overvaluations  of 
stock  worth  par  or  above  par  are  created  as  easily  as  in  the  case 
of  watered  stock  worth  less  than  par,  and  generally  by  similar 
methods.  Stock  exchanges,  through  the  improper  manipulation  of 
operators,  are  frequently  used  to  create  wrong  impressions  of  stock 
values;  but  in  such  cases,  and  all  cases,  it  is  not  the  water  in  the 
stock  that  causes  the  chief  trouble  among  unwary  investors.  It  is 
the  water  in  the  prices  they  pay  for  it.  And  that  kind  of  water 
may  be  found  at  times  irrigating  with  remarkable  impartiality 
purchase  of  stocks  at  all  prices  above  and  below  par." 

This  is  emphasized  by  the  Hon.  M.  A.   Knapp,  Chairman  of 

the    Interstate    Commerce    Commission,    who,   in   a   paper   before 

the  American  Association  for  the  Advancement  of  Science,  said : 

"If  common  assertion  is  well  founded,  the  body  politic  is  af- 
flicted with  a  grievous  ailment  which  takes  the  name  of  'trusts.' 
Those  who  diagnose  this  malady — and  nearly  every  one  professes 
ability  to  do  so — declare  that  one  of  its  worst  and  most  aggravated 
symptoms  is  over-capitalization,  or  'watered  stock.'  For  this  and 
other  manifestations  of  the  disorder  the  favorite  specific  just  now 
Is  publicity. 

"With  all  deference  to  those  who  advocate  such  publicity  as  a 
preventive  of  stock-watering,  I  venture  to  doubt  the  correctness 
of  their  contention.  Indeed,  my  scepticism  goes  to  the  extent  of 
questioning  whether  over-capitalization,  as  such,  is  a  matter  of 
real  gravity,  much  less  a  portentous  evil  which  demands  an  extra- 
ordinary remedy.  I  hold  it  unproved  that  the  excessive  issue  of 
corporate  securities  is  a  source  of  such  danger  as  to  excite  alarm, 
and  I  am  yet  to  be  convinced  that  enforced  publicity  will  not  be  a 
harmful   exercise   of   public   authority. 

"Leaving  out  the  speculator,  and  taking  into  account  only  those 
seeking  honest  investment,  ten  times  more  money,  to  say  the  least, 
has  been  sunk  in  farm  mortgages,  suburban  lots,  patent  rights, 
buying  and  selling  grain,  cotton  and  other  commodities,  where  no 
corporate  shares  were  dealt  in  or  even  existed,  than  was  ever  lost 
on  account  of  the  fictitious  or  excessive  issue  of  corporate  se- 
curities. If  the  State  is  to  assume  the  function  of  keeping  folly 
and  cupidity  from  paying  twice  or  ten  times  what  a  thing  is  worth, 
it  surely  would  assume  the  guardianship  of  the  largest  numbers 
and  the  heaviest  losers." 

The  foregoing  appHes  to  the  interest  of  the  investor  as  affected 

by  watered  stock.     As  regards  the  interest  of  the  consumer  of 

pubhc  utilities,  the  watered  railroad  carries  at  the  same  price  as 

the   unwatered,   and   the   watered   gas   company   sells   its   product 

at  the  same  price  as  the  unwatered  one.     There  is  a  thought  in 

this  connection  which  may  not  have  occurred  to  everybody,  and 


140  SELECTED    ARTICLES 

that  is  that,  even  if  watered  stock  is  a  medium  through  which 
promoters  do  sometimes  make  profit  in  one  way  or  another,  are 
they  not  entitled  to  a  profit?  Would  our  railroads  and  other 
public  utilities  have  been  built  if  there  had  not  been  a  profit  to 
promoters  beyond  six  per  cent,  upon  the  actual  investment? 
Some  men  put  their  money,  labor  and  time  into  transportation  ; 
some  into  real  estate.  Transportation  made  the  real  estate  valu- 
able. It  saved  time  for  the  general  public  and  promoted  their 
comfort ;  yet  the  men  who  have  grown  rich  through  increased 
values  of  real  estate  are  honored,  and  those  who  have  grown 
rich  through  transportation  are  denounced  as  "franchise  grab- 
bers" and  "public  robbers."  The  same  is  true  of  lighting, 
telephone  and  other  corporations.  It  appears  that  to  grow  rich 
through  rendering  the  public  a  service  is  a  crime,  while  to  grow 
rich  without  such  service  is  honorable.  How  many  of  us  ap- 
preciate that  "corporation"  means  "cooperation"  and  that  the 
captains  of  industry,  backed  by  many  small  partners  (stock- 
holders), are  doing  a  great  work? 

The  advocates  of  municipal  ownership  and  operation  claim,, 
first,  that  it  would  be  a  relief  from  present  political  corruption  ; 
second,  that  profits  would  be  realized  for  the  public  which  are  now 
absorbed  by  corporations.  I  believe  that  political  corruption  un- 
der municipal  ownership  and  operation  would  be  infinitely  greater 
than  at  present,  and  the  expected  profits  would  turn  out  losses, 
to  be  borne  by  taxpayers.  I  have  stated  facts  and  opinions  in 
support  of  this  belief.  I  could  add  many  others  if  space  per- 
mitted. 

There  is  a  large  and  growing  class  of  citizens  who  believe  in 
"a  square  deal"  for  everybody ;  that  government  should  protect 
life,  property,  health  and  education,  but  that  in  a  country  with 
universal  suffrage  the  number  of  political  employees  should  not 
be  unduly  increased ;  that  the  line  should  be  drawn  between 
public  ownership  and  public  administration,  that'  in  a  manufac- 
turing or  transportation  business  public  administrativ-e  waste  ex- 
ceeds corporate  profit,  and  political  dangers  are  greatly  en- 
hanced ;  and  that  Individualism  as  distinguished  from  Socialism 
should  be  encouraged. 


MUNICIPAL   OWNERSHIP  141 

Engineering  Magazine.  34:  509-11.  December,  1907. 

Comparison    of    the    Cost    of    Steam    Power    in    Municipal    and 
Privately-Operated   Plants.     John  W.   Hill. 

During  the  past  few  months  I  have  had  occasion  to  collect 
statistics  on  the  cost  of  steam  power,  and  in  support  of  the  claim 
of  better  management  by  private  corporations,  advanced  in  this 
paper,  it  is  found  that  even  in  the  few  cities  having  the  highest 
type  of  triple-expansion  pumping  engines,  and  accessories  to 
match,  and  in  which  the  contract  test  and  annual  duties  of  the 
machinery  are  the  best  ever  attained,  the  cost  of  power  per  year 
is  greater  than  in  the  large  well-managed  steam  power  plants, 
owned  and  operated  by  the  private  electric  and  manufacturing 
corporations,  and  a  comparison  of  statistics  divided  as  to  cost 
of  fuel,  labor,  repairs  and  stores,  show  the  excess  cost  to  be  prin- 
cipally in  the  item  of  labor. 

In  the  following  table,  the  figures  represent  the  annual  costs 
per  indicated  horse-power  of  prime  movers :  Coal  figured  at 
$2.50  per  ton.  excepting  Hamilton,  $2.20  per  ton.  City  Water- 
Works,  and  Philadelphia  Power,  8,760  hours  ;  Pittsburg  Power, 
8,666  hours ;  Hamilton,  8,000  hours. 

Nature   of   power.  Fuel.  Labor.  Repairs.  Supplies.  Total 

City    pumping    works (1)  $15.70  $24.62  $5.96  $2.74     $49.02 

City    pumping    works (2)  17.44  25.19  5.25  2.58  51.48 

City    pumping    works (3)  16.70  24.01  1.28  2.05  44.04 

City    pumping    works (4)  16.75  21.90  1.85  1.88  42.38 

City    pumping    works (5)  16.82  26.19  1.17  1.59  45.77 

City    pumping    works (6)  21.39  15.64  9.62  1.24  47.90 

City    pumping    works (7)  18.89         4.14  ...  50.03 

City    pumping    works (8)  27.64  26.44  9.55  5.44  69.08 

New   York    (9)  25.55  13.13  5.90  1.42  46.00 

Philadelphia     (10)  20.51  6.61  1.52  1.32  29.96 

Pittsburg     (11)  19.51  4.42  3.55  2.50  29.97 

Hamilton     (12)  16.90  5.18  0.88  0.64  23.62 

It  is  interesting  to  note  that  the  total  cost  of  power  by  a 
private  corporation.  No.  12  on  the  list,  is  less  than  the  cost  of 
labor  alone  in  the  city  water-works  power,  Nos.  i.  2,  3,  5.  and  8.' 
The  figures  are  from  the  last  annual  reports.  The  costs  of  labor, 
repairs,  and  supplies  are  not  known  in  detail  for  No.  7,  but  can 
roughly  be  stated  as  $25  for  labor,  $4.14  for  repairs  and  $2  for 
supplies. 

In  each  city  pumping  station,  the  engines  considered  are  from 
the  best  known  and  highest  class  builders,  and  the  water-works 


142  SELECTED    ARTICLES 

profession  is  accustomed  to  point  to  the  cities  considered  as  ex- 
amples of  excellent  water-works  management. 

The  average  cost  of  labor  in  the  eight  city  power  stations  is 
$23.62  per  indicated  horse-power  per  year  for  8,760  hours,  while 
the  average  cost  of  labor  in  the  private  corporation  stations  is 
^7-33,  or  about  one-third  the  cost  in  the  municipally-owned  and 
operated  stations,  or  to  state  the  matter  in  different  form,  the 
city  uses  three  men  to  do  one  man's  work. 

Engineers  generally  recognize  the  modern  high  duty  triple- 
expansion  pumping  engine  as  the  highest  type  of  steam  power, 
and  the  service  of  pumping  at  constant  speed,  against  a  steady 
head,  to  reservoirs,  the  'optimum'  condition  for  high  running 
duty.  Moreover,  the  long  runs  of  pumping  engines,  without  in- 
terruption for  Sundays  are  calculated  to  favor  the  annual  econ- 
omy, when  compared  with  steam  engines  working  under  a  con- 
stantly varying  load,  and,  in  all  but  traction  and  electric  lighting 
stations,   stopped  altogether   for   Sundays  and  holidays. 

The  duties  obtained  on  the  trials  of  Engines  i  to  6,  inclusive, 
are  the  highest  in  the  history  of  pumping  machinery,  a  fact 
well  attested  by  the  annual  charge  for  fuel ;  indeed  the  fuel 
costs,  on  the  average,  are  as  good  for  the  city-managed  works,  as 
for  the  private-managed  works.  But  when  ^-ou  come  to  the  labor 
charge,  there  is  where  the  politician  comes  to  the  front  in  great 
shape.  There  could  be  no  political  advantage  in  being  wasteful 
of  fuel,  but  there  is  a  decided  advantage  in  future  elections  in 
being  wasteful  of  labor.  Two  men  can  cast  two  ballots,  and 
three  can  do  better,  while  the  coal  burned  in  the  furnace  can- 
not vote,  and  there  is  therefore  no  advantage  in  being  prodigal 
with  it. 

After  allowing  for  the  favorable  conditions  of  modern  water- 
works steam  pumping  service,  even  then  the  cost  of  power  in 
the  best  private  w^orks  is  less  than  in  the  best  water-works  under 
municipal  management. 

Instances  can  be  multiplied  of  povirer  costs  under  municipal 
and  private  control  which  will  verify  the  low  cost  for  labor  for 
private  control  and  the  high  cost  for  municipal  control.  And  if 
compared  on  the  volume  of  business  transacted,  it  can  be  demon- 
strated in  almost  anv  if  not  all  cities  that  the  cost  per  unit  of 


MUNICIPAL  OWNERSHIP  143. 

work  performed  or  business  conducted  is  much  greater  for 
public   than    for   private   business. 

The  least  objectionable  of  public  works  which  can  be  con- 
ducted by  the  public  are  the  building  and  maintenance  of  sewers 
and  sewage  disposal  works,  the  cleaning  of  streets  and  the  col- 
lection and  disposal  of  garbage,  although  in  some  large  cities  this 
work  is  now  the  subject  of  annual  contract.  Water-works,  elec- 
tric and  gas  works,  trolley  lines,  and  steam  and  hot  water  heat- 
ing systems,  works  employing  large  numbers  of  people,  and 
requiring  skilled  assistance,  should  be  the  subject  of  private 
construction  and  control  under  contract  or  franchise  which  will 
properly  safeguard  the  interests  of  the  public  and  prevent 
extortion   or   poor    service. 

Cities  have  been  and  can  be  robbed  by  public  service  corpora- 
tions, but  only  with  the  aid  and  connivance  of  public  officials. 
Standing  alone,  the  public  service  corporations  will  be  compelled 
to  meet  the  obligations  imposed  on  them  by  their  franchises, 
and  give  the  public  the  required  service  at  fair  rates.  The 
legislature  can  pass  laws  and  the  city  councils  can  pass  ordi- 
nances giving  away  public  rights,  and  the  public  service  corpora- 
tions may  be  the  beneficiaries  thereby,  but  the  officials  chosen 
by  the  people  to  represent  them  are  the  culpable  parties  in  such 
transactions. 


Annals    of   the    American    Academy.    28:    371-84.    N.    '06. 

American    Municipal    Services    from   the    Standpoint   of   the   En- 
trepreneur.    Chester  Lloyd  Jones. 

The  people  of  the  L^nited  States  have  been  said  to  possess 
great  confidence  in  machinery.  This  is  a  characteristic  quite  as 
much  of  our  political  as  of  our  industrial  life.  An  example  of 
the  latter  fact  is  the  popular  attitude  toward  public  service  corpo- 
rations. The  average  man  reads  of  monopolized  industries,  with 
their  manipulations  of  prices  and  arbitrary  charges  for  equal 
services,  and  at  once  looks  to  a  new  set  of  political  machinery 
to  eliminate  the  evil.  He  concludes  that  public  service  corpora- 
tions are  monopolistic  in  character  and  that  the  only  way  to  cure 


144  SELECTED    ARTICLES 

the  abuses  connected  with  them  is  to  summarily  abolish  the  order 
of  things  that  made  the  abuses  possible.  When  the  local  services 
are  poorly  managed  he  seizes  upon  accounts  of  the  successful 
management  of  similar  enterprises  by  public  officials  in  distant 
countries  and  decides  that  the  remedy  is  to  adopt  the  same  system 
at  home.  This  attitude  of  mind  is  brought  about  by  drawing  too 
uncritical  a  contrast  between  what  exists  under  widely  different 
conditions  in  a  foreign  country  and  the  actual  management  of 
the  home  services.  The  assumption  is  made  that  the  same  po- 
litical machinery  will  work  the  same  results  at  all  times  and  in 
all  places.  Instead  it  should  be  realized  that  the  time  and  place 
are  ordinarily  the  elements  immensely  more  important,  and  that 
these  being  in  an  ideal  condition  the  method  of  management  be- 
comes a  comparatively  unimportant  matter.  Given  perfect  con- 
ditions, and  the  discussion  of  the  superiority  of  public  or  private 
management  of  the  public  services  becomes  purely  academic, 
but  so  long  as  perfect  conditions  do  not  exist  there  is  an  oppor- 
tunity for  an  honest  difference  of  opinion  as  to  the  relative  ad- 
vantages of  the  two  methods. 

In  the  minds  of  all  the  chief  question  in  the  management  of 
the  public  services  is  how  to  secure  the  greatest  efficiency.  Put- 
ting aside,  then,  the  purely  academic  question  of  whether  public 
or  private  capital  should  manage  public  services,  it  becomes 
simply  a  problem  of  solving  which  of  the  two  methods  under  the 
condition  surrounding  the  particular  enterprise  gives  greater 
promise  of  securing  good  results.  Too  much  stress  cannot  be 
placed  upon  the  fact  that  in  choosing  between  any  systems  of 
managing  the  public  services  the  community  in  which  they  are 
placed  is  an  inseparable  element  in  the  problem. 

It  is  largely  from  this  point  of  view  that  the  public  service 
corporations  in  the  United  States  claims  that  its  administration  of 
the  public  services  is  superior  to  that  by  public  officers.  It  is 
asserted  that  under  present  conditions  private  management  brings 
better  net  results — the  claim  of  greater  efficiency.  That  the 
government  has  a  right  to  regulate  the  action  of  public  service 
corporations  is  no  longer  a  subject  of  dispute  in  the  law  of  the 
United  States.  The  right  of  the  state  to  go  even  to  the  length 
of  appropriating  the  services  to  itself  in  return  for  just  payment 
to  the  owners  or  lessees  is  unquestioned,  but  if   such   action  is 


MUNICIPAL   OWNERSHIP  145 

taken  it   should  be  dependent  on   the   advantages   to   be  gained 
and  not  on  the  basis  of  sentiment  or  prejudice. 

From  the  standpoint  of  the  entrepreneur  public  services  may- 
be divided  into  two  classes,  according  to  the  degree  of  profes- 
sional skill  necessary  to  their  management:  First,  there  are  those 
which,  after  the  original  construction  is  completed,  require  only- 
ordinary  manual  labor  and  a  fair  degree  of  executive  and  clerical 
ability  to  keep  them  in  efficient  condition.  Such  until  recently 
has  been  the  character  of  the  work  of  street  cleaning  in  even  our 
large  cities.  In  the  management  of  services  of  this  character  but 
little  difference  need  exist  between  public  and  private  operation. 
A  fairly  able  manager  at  the  head  and  a  fair  devotion  to  duty 
by  the  staff  should  produce  passable  results.  At  the  other  ex- 
treme stand  those  branches  which  demand  a  high  degree  of 
executive  ability,  good  commerical  judgment  and  a  great  tech- 
nical skill  to  secure  satisfactory  results.  Such  are  the  gas  and 
electric  lighting  plants  and  the  transportation  systems  w^hich  have 
come  to  play  so  important  part  in  our  municipal  life.  It  is  very 
evident  that  the  majority  of  our  public  services  approach  the 
latter  class  much  more  than  the  former,  and  it  is  to  the  considera- 
tion of  such  enterprises  that  we  wall  chiefly  turn  our  attention. 

The  entrepreneur  insists  that  under  present  conditions  a 
system  of  public  management  varies  in  success  inversely  as  the 
complexity  of  the  organization  necessary  to  render  the  service. 
The  chief  points  of  superiority  claimed  for  private  management 
are  as  follows : 

First,  the  effect  of  the  desire  of  gain  upon  the  management. 
It  is  all  important  to  secure  some  force  which  will  affect  the 
entire  administration  with  a  desire  for  efficiency.  Any  element 
which  fails  to  contribute  to  the  sum  of  efficiency  of  the  plant  is 
a  dead  weight,  a  hindrance  to  the  earnings  of  the  company  and 
lessens  the  quality  of  the  service  performed.  The  strongest  stim- 
ulating influence  which  can  be  easily  brought  to  bear  upon  the 
average  man  is  the  desire  for  gain.  If  this  force  can  be  enlisted 
on  the  side  of  efficiency  the  battle  is  won.  There  are  many  rea- 
sons why  this  is  much  easier  of  accomplishment  under  private 
management  than  under  public  officials. 

The  continual  shifting  of  political  partie?  and  of  the  men  in 


146  SELECTED    ARTICLES 

■ 

influence  in  the  same  party  has  prevented  the  development  in 
our  cities  of  a  corps  of  municipal  employees  who  can  feel  con- 
fident that  faithful  v^ork  brings  permanence  of  tenure,  and  that 
greater  ability  insures  more  rapid  advancement.  The  disintegrat- 
ing effect  of  short  terms  and  insecure  tenure  of  office  is  evident 
in  all  ranks  of  the  service,  from  the  heads  of  departments  to 
the  day  laborers.  Since  the  tenure  of  office  is  but  for  a  brief 
period  and  political  fences  are  constantly  in  need  of  repair, 
there  is  every  temptation  on  the  part  of  the  mayor  and  the  heads 
of  departments  under  him  to  use  the  means  in  their  hands  for 
their  continuance  in  office.  Manipulation  of  the  municipal 
patronage  can  be  practiced  without  causing  important  protest. 
Even  if  the  public  services  suffer  in  no  other  way  from  this  in- 
fluence, their  management  is  bound  to  be  in  more  or  less  constant 
flux  from  changes  of  party  or  changes  within  a  party. 

The  lower  officers  and  laborers,  too,  feeling  that  in  any  case 
their  term  must  be  short,  cannot  but  be  susceptible  to  the 
thought  that  while  the  opportunity  lasts  the  best  must  be  made  of 
it.  A  temptation  to  make  the  most  of  an  easy  job  at  good  pay 
is  always  present,  and  there  is  a  strong  possibility  that  the  money 
interests  of  the  municipality  will  have  to  suffer  as  a  consequence. 
To  say  the  least,  the  chance  of  advancement  and  permanent 
tenure  being  removed  the  feeling  comes  to  the  laborer  that  the 
position  will  last  in  any  case  as  long  as  the  term  of  office.  The 
next  election  brings  him  an  even  chance  of  getting  his  work 
hack  again,  but  long  and  faithful  service  gives  him  no  claim  to 
preference.  The  security  of  his  position  depends  rather  upon 
his  loyalty  and  services  to  the  party  than  to  the  city's  interests. 
His  political  activity  becomes  more  important  in  his  eyes  than 
his  industrial  duties,  and  this  attitude  inevitably  leads  to  a 
disposition  to  "sit  down  on  his  job." 

Another  disadvantage  that  the  short  term  of  offi.ce  brings  to 
the  publicly-elected  manager  of  the  city  services  is  that,  no  matter 
how  anxious  he  may  be  to  serve  the  municipality  creditably,  he 
hardly  has  time  to  become  familiar  with  his  duites  when  he  is 
turned  out  of  office.  The  branches  of  a  large  city  service  are 
so  many  and  intricate  that  it  would  take  almost  a  whole  term 
for  the  new  official  to  become  truly  acquainted  with  the  depart- 
ment it  was  his  duty  to  manage. 


MUNICIPAL  OWNERSHIP  147 

As  a  general  rule  the  man  elected  has  much  less  experience 
in  management  of  work  similar  to  that  over  which  he  is  to 
preside  than  would  a  man  chosen  to  manage  a  private  business 
of  the  same  size.  Take,  for  example,  the  management  of  a  big 
city  gas  plant  or  street  car  system.  What  guarantee  have  we 
that  the  popularly  elected  chief  will  have  seen  the  service  in  the 
lower  positions  in  a  similar  enterprise  which  would  be  required 
of  one  put  in  charge  of  a  like  concern  privately  managed?  We 
are  not  here  concerned  with  the  question  of  whether  or  not  the 
public  can  ever  be  impressed  with  the  necessity  of  electing  ex- 
perienced men  to  manage  their  public  services,  but  simply  with 
the  fact  that  the  histor}'  of  American  municipal  enterprises  does 
not  prove  that  they  regularly  do  so.  while  the  history  of 
privately  managed  services  shows  the  adoption  of  that  practice. 

The  public  officer  has  generally  less  technical  training  than  the 
one  selected  under  private  management.  The  very  circum- 
stances of  American  municipal  politics  at  the  present  time,  where 
the  salaries  of  the  offices  and  the  patronage  connected  with  them 
constitute  the  chief  legitimate  reward  for  political  service,  make 
it  highly  improbable  that  the  more  important  offices  connected 
with  the  publicly-managed  enterprises  will  be  given  to  men  who 
have  not  taken  an  active  part  in  securing  the  success  of  the  party  in 
power.  This  so  narrows  the  number  of  men  specially  fitted  by 
education  who  are  also  apt  to  be  selected  for  the  offices  by  the 
political  party  as  to  practically  eliminate  the  class  entirely. 
Further,  the  reall}^  first-class  man  would  not  only  be  thus  debar- 
red, but  as  a  rule  would  not  accept  the  position  if  offered  because 
of  the  better  opportunities  obtainable  in  the  field  of  private 
enterprise.  Under  these  conditions  the  public  services  must 
operate  at  a  disadvantage.  It  means  that  as  a  rule  the  man 
who  is  at  the  head  of  the  work  is  not  a  master  of  the  technique 
of  operation  in  his  department.  He  must  rely  upon  his  sub- 
ordinates for  advice  and  information  which  he  should  himself  be 
in  a  position  to  give.  He  cannot  see  so  clearly  what  should  be  done, 
and  adopt  a  firm  and  consistent  policy  to  carry  it  out. 

These  are  the  disadvantages  of  public  management  when  the 
heads  of  departments  are  chosen  directly  by  the  people.  Ap- 
pointment by  their  political  representative,  the  mayor,  or  election 
by   councils    or  by   a   combination   of   these   methods,   has   much 


148  SELECTED    ARTICLES 

the  same  effect.  A  greater  independence  of  selection  may  some- 
times be  obtained,  but  the  controlHng  influence  is  more  apt  to 
be  politics  than  efficiency.  Even  if  the  appointed  officer  wishes  to 
maintain  an  independent  attitude,  to  carry  on  the  operations  of 
his  department  on  strictly  business  principles  and  to  keep  his 
selection  of  employees  free  from  any  but  industrial  considera- 
tions, he  can  hardly  expect  to  carry  out  these  plans.  Council- 
men  will  unfailingly  urge  upon  him  the  employment  of  this  man 
and  that,  regardless  of  whether  additional  help  is  needed  or  not. 
The  temptation  to  create  a  position  for  such  an  applicant  or  to  dis- 
charge some  one  not  possessed  of  political  support  is  great.  The 
head  of  a  department  knows  that  his  plans  for  keeping  up  a 
high  standard  of  efficiency  are  first  and  last  dependent  upon 
receiving  adequate  appropriations  from  councils.  To  get  out  of 
sympathy  with  the  representatives  would  be  to  antagonize  the 
very  body  upon  whom  he  must  depend  for  his  resources.  He  is 
thus  placed  between  two  fires — he  must  choose  between  allowing 
politics  to  enter  into  the  management  of  his  labor  account  or  he 
must  run  the  risk  of  creating  hostility  or  at  least  lack  of  interest 
on  the  part  of  councils.  As  a  rule  the  head  of  a  department 
chooses  what  he  considers  the  lesser  of  the  two  evils  and'  sur- 
renders his  labor  account  to  exploitation.  The  door  once  opened, 
it  is  almost  impossible  to  check  the  advance  of  politics,  and  the 
w'ould-be  impartial  director  finds  himself  forced  into  the  active 
campaign.  This  picture  is  not  an  exaggeration,  as  is  proven  by  the 
experience  of  many  cities.  In  practice  we  find  that  the  appointive 
head,  though  he  may  often  have  the  advantage  of  experience  over 
the  officer  directly  elected  works  under  no  less  a  disadvantage 
than  he.  The  management  of  the  Philadelphia  gas  works  illustrates 
the  case.  Though  the  chief  was  appointed  and  at  first  made 
a  show  of  independence,  his  forced  reliance  on  councils  soon  re- 
duced the  department  of  gas  to  a  mere  wheel  in  the  machine. 
Providing  that  the  management  of  city  services  is  under  the 
charge  of  boards  elected  for  so  long  a  term  as  to  constitute 
practically  permanent  bodies  a  greater  independence  of  action 
may  reasonably  be  expected  from  the  members,  but  the  appoint- 
ments are  still  bound  to  be  sought  by  and  as  a  rule,  given  to  the 
men  who  have  rendered  yeoman  service  to  the  party  rather  than 
to   those   who   have   the   best   experience    and   technical   training. 


MUNICIPAL   OWNERSHIP  149 

The  limited  possibilites  in  the  way  of  salary  remain  the  same  as 
where  the  officers  are  elected.  Even  granting  that  the  officers 
are  well  qualified  when  elected  or  appointed  to  the  permanent 
board  they  have  not  the  same  incentive  as  when  working  for  a 
personal  employer.  The  loyalty  to  the  municipality  is  not,  with 
notable  exceptions,  as  keen  as  the  loyalty  to  the  private  employer. 
The  officer  is  almost  sure  to  hold  his  position  for  the  full  term 
even  if  no  great  efforts  for  improvement  are  made,  and  that 
fact — all  unconsciously,  perhaps,  but  none  the  less  surely — les- 
sens his  efficiency  as  corhpared  to  the  man  who  realizes  that 
his  position  and  advancement  depend  upon  his  best  efforts  every 
day  and  his  being  up  with  the  times  in  his  plans  for  extension 
and    improvement. 

Even  when  the  head  offices  are  filled  by  the  members  of  a  per- 
manent board  there  still  may  remain  the  management  of  the 
employment  list  on  the  spoils  principle.  This  of  course  means 
that  the  larger  portion  of  the  service  is  left  under  the  same  dis- 
advantages as  before  described.  These,  in  brief,  are  the  condi- 
tions which  put  the  personel  of  a  publicly  managed  city  service 
under  a  disadvantage  as  compared  to  private  enterprise.  In  order 
to  bring  the  two  more  sharply  into  contrast,  let  us  review  the 
similar  points  as  shown  in  an  average  private  corporation.  Here, 
again,  the  comparison  is  not  between  what  should  be  and  what 
is  but  is  based  on  present  conditions  in  the  United  States. 

Those  at  the  head  of  the  private  company  are  responsible  to 
the  stockholders  much  more  directly  in  fact,  however  it  may  be  in 
theory,  than  are  our  public  servants  to  the  people.  They  have 
greater  reason  to  believe  that  their  offices  are  permanent  during 
good  behavior.  Efficiency  is  the  chief  claim  to  permanence  of 
position  and  exceptional  ability  is  rewarded  by  rapid  advance- 
ment. •  No  time  is  wasted  in  non-industrial  pursuits,  such  as 
caring  for  the  party  fortune  in  the  employee's  own  ward. 

Secondly.  Experience  and  technical  training  are  at  a  premium 
and  are  definitely  sought  after  from  first  to  last.  The  salaries  are 
higher  than  in  public  enterprises  where  the  officer's  responsibility 
is  the   same. 

Thirdly.  There  is  continuity  of  policy.  The  company  cannot  be 
carried  along  on  any  but  sound  business  principles.  The  con- 
sciousness of  the  permanence  of  the  interests  involved  makes  the 


150  .  SELECTED  ARTICLES 

directors  less  prone  to  adopt  a  policy  which  would  temporarily 
bridge  over  a  difficulty  at  the  cost  of  increased  expenditure  later 
on.  There  is  no  temptation  to  conceal  the  state  of  affairs  "until 
after  election,"  as  must  often  be  the  case  where  party  interests 
clash  with  those  of  the  public  industries. 

Besides  the  disadvantages  connected  with  the  personel  of  man- 
agement and  operation  there  are  other  limitations  of  municipal 
administration.  In  the  management  of  the  finances  of  the  public 
services  the  city  is  distinctly  handicapped.  The  administration 
of  any  large  corporation  is  subject  to  occasional  demands  for 
large  amounts  of  money  which  cannot  always  be  foreseen.  Such 
are  the  unusual  expenditures  caused  by  accidents  or  the  necessity 
of  making  an  important  addition  to  the  plant  at  once.  To  meet 
such  a  condition  is  difficult  for  most  of  our  cities.  An  emergency 
fund  large  enough  to  cover  such  demands  would  prove  too  easy 
a  source  of  income  to  be  placed  in  the  hands  of  the  ordinary 
authorities.  Such  a  practice  would  soon  lead  to  appropriations 
for  "extraordinary"  purposes  wdiich  would  come  to  be  counted 
upon  as  a  regular  source  of  income  for  the  department. 

To  make  the  appropriation  rest  on  special  action  of  councils 
also  would  be  a  possibility,  but  would  not  be  entirely  satisfactory. 
Councils  are  not  always  easily  convinced  of  the  advisability  of  an 
expenditure  even  when  it  would  appear  an  imperative  necessity 
to  even  the  casual  observer.  Reluctance  to  incur  the  criticism 
through  running  up  the  tax  rate  or  desire  to  spend  the  available 
money  on  some  more  brilliant  but  less  necessary  project  has  de- 
feated many  excellent  and  imperative  improvements  and  exten- 
sions in  publicly  managed  city  services.  Even  if  councils  realize 
the  advantage  or  need  of  certain  changes  it  may  be  impossible 
for  them  to  grant  the  money,  though  they  wish  to  do  so.  Many 
of  our  cities  also  have  already  reached  the  statutory  limit  of  in- 
debtedness and  it  would  be  impossible  for  them  to  raise  the  money 
needed  to  meet  any  largely  increased  demands  upon  their  treasur- 
ies. Thus  the  improvement,  though  it  might  be  all  important  to  have 
it  made  at  once,  would  have  to  be  postponed  until  the  legislature 
could,  by  special  act,  allow  the  city  to  increase  its  indebtedness. 
Whatever  method  of  solution  is  adopted  it  seems  clear  that  the 
city  is  at  a   distinct   disadvantage   in   meeting  unusual   demands 


MUNICIPAL   OWNERSHIP  151 

which  may  be  made  upon  it  for  maintaining  its  public  services  at 
their  highest  efficiency. 

A  private  company  in  a  similar  position  experiences  no 
such  hindrance.  A  good  financial  risk  can  easily  secure  im- 
mediate command  of  capital,  and  does  not  have  to  go  before  a 
local  or  state  legislature  where  conflicting  interests  may  delay  if 
not  defeat  the  needed  appropriation.  The  financial  interests  of 
those  managing  the  company  also  prompt  them  to  be  on  a  keener 
lookout  for  any  unusual  demand  which  may  be  made  upon  them. 
They  hold  a  better  chance  of  foreseeing  the  necessity  for  exten- 
sions, alterations  or  improvements,  and  have  better  facilities  for 
meeting  the  situation  when  it  comes. 

^luch  of  the  writing  denunciatory  of  private  management  of 
public  services  is  based  on  the  evil  effects  of  the  influence  of  cor- 
porations in  politics.  Many  would  be  willing  to  concede  the 
superior  efficiency  of  private  management  in  general,  but  insist 
that  all  the  advantages  gained  through  such  administration  are 
much  over-balanced  by  the  corrupt  practices  due  to  intrigues  in 
the  local  legislative  bodies.  The  evils  connected  with  attemped 
franchise  grabbing  are  so  great,  it  is  asserted,  that  the  only  way  to 
abolish  these  influences  is  to  effectively  take  the  services  out  of 
politics  by  putting  them  under  public  management  absolutely.  Such 
arguments  are  based  on  the  assumption  that  political  influences 
are  removed  by  delivering  the  services  into  public  control.  Politics 
are  to  be  removed  by  placing  the  management  in  the  hands  of 
politicians.  Thus  stated,  it  becomes  clear  that  the  adoption  of 
control  by  the  public  does  not  necessarily  mean  all  it  seems  to 
indicate.  As  a  matter  of  fact,  under  present  American  conditions, 
politics  are  a  permanent  factor  in  the  management  of  public  serv- 
ices whether  under  private  or  public  operation.  The  patronage 
wielded  by  public  officers  is  no  whit  less  an  important  factor  in  lo- 
cal politics  than  that  exerted  by  the  franchise-holding  companies. 
Beyond  a  doubt  such  influence  is  baneful — and  in  the  one  case 
quite  as  much  as  in  the  other.  Whether  we  shall  be  able  to 
develop  laws  and  a  public  opinion  which  will  eliminate  these 
influences  is  still  a  question  for  the  future.  Our  course  of  action 
for,  the  present  must  be  planned  with  a  frank  recognition  of  the 
existence  of  such  influence  and  the  object  of  reducing  it  to  a 
minimum.     No  one  who  considers  the  situation  carefully  would 


152  SELECTED    ARTICLES 

assert  the  presence  of  political  influence  in  the  one  case  and  deny 
it  in  the  other.  The  best  interests  of  the  community  demand 
that  whatever  system  of  management  be  chosen  that  politics  be 
eliminated.  For  the  good  of  the  corporations  also  it  is  beyond 
doubt  to  be  desired  that  they  should  confine  themselves  wholly 
to  industry.  Under  present  conditions  the  temptation  to  enter 
politics  for  the  defense  of  their  interests  is  in  many  cases  almost 
irresistable.  Oftentimes  these  interests  may  be  legitimate  and 
need  defence  only  due  to  the  general  prejudice  against  the 
management  of  businesses  affected  with  a  public  interest  by 
private  individuals. 

This  state  of  affairs  is  most  unfortunate  both  for  the  public 
and  for  the  entrepreneur.  On  the  one  side  it  produces  an  acute 
distrust  of  all  companies  making  proposals  to  do  public  work. 
Every  proposition  is  attached  as  if  it  were  an  attempt  to  legalize 
the  stealing  of  public  money.  The  representatives  of  the  people 
are  often  prejudiced  and  unable  to  consider  the  purely  industrial 
side  of  the  enterprise  in  question.  Listead  of  attempting  to 
attract  capital  while  fully  protecting  municipal  interests,  they  are 
apt  to  approach  the  granting  of  a  franchise  in  a  hostile  attitude. 
and  often  insist  on  useless  stipulations  which  are  an  expense  to 
the  company  and  of  no  advantage  to  the  community.  As  an 
example  of  such  specifications  may  be  cited  the  requirement  made 
by  one  of  our  largest  cities  that  service  pipes  for  gas  must  be 
put  in  every  sixteen  feet.  When  it  is  remembered  that  such 
services  often,  as  in  this  case,  extend  for  long  distances  along 
parks  and  undeveloped  districts  the  regulation  appears  ridicu- 
lous as  well  as  useless. 

The  lack  of  sympathy  between  the  public  and  its  servants 
has  an  equally  bad  effect  upon  the  attitude  of  the  latter.  Re- 
alizing that  the  spirit  of  many  of  those  from  whom  they  must 
get  their  rights  is  one  of  hostility  and  unreasoning  prejudice^ 
they  assume  the  stand  that  unfair  measures  may  be  used  to  over- 
come unfair  treatment.  Once  the  field  has  been  entered,  there  is 
the  temptation  to  extend  the  company's  activities  beyond  the  de- 
fense of  their  legitimate  interests  to  the  securing  of  special 
and  questionable  privileges.  The  influence  used  to  prevent  prej- 
udiced or  "hold-up"  legislation  may  easily  be  continued  to  deaden 
the   convictions   of   would-be   honest    representatives.      Examples; 


MUNICIPAL   OWNERSHIP  153 

of  the  use  of  corporate  influence  in  this  way  fill  all  too  many- 
pages  of  the  history  of  American  municipal  councils.  The 
general  result  of  such  a  state  of  affairs  is  mutual  distrust  and 
recrimination. 

It  must  not  be  supposed,  however,  that  by  removing  the  pub- 
lic services  from  private  management  all  evils  connected  with 
their  administration  will  be  at  an  end.  Our  American  experience 
demonstrates  quite  the  contrary.  The  onl\-  definite  change  which  , 
necessarily  results  is  the  transfer  of  the  influence  exerted  by  the 
private  companies  into  the  hands  of  the  local  politicians,  an 
alternative  by  no  means  insuring  improvement.  It  is  not  to  be 
expected  that  in  a  country  where  the  rewards  of  office  are  the 
most  important  object  of  political  struggles,  rather  than  any 
honor  or  social  position  attached  thereto,  that  the  large  patron- 
age offered  by  the  payrolls  of  the  publicly  managed  municipal 
services  would  not  prove  a  prey  to  the  ward  politician.  The 
chance  to  secure  ''jobs"  with  liberal  pay  at  public  expense  for 
the  political  and  personal  friends  of  the  successful  candidates  is 
too  tempting  to  be  resisted.  It  may,  of  course,  be  argued  that  an 
efficient  civil  service  would  put  all  the  positions  of  this  character 
out  of  the  reach  of  the  politicians.  That  is  doubtless  possible, 
but  the  creation  of  an  effective  civil  service  law  for  the  manage- 
ment of  the  present  public  positions  should  be  a  prerequisite  be- 
fore the  city  should  embark  on  new  and  expensive  departures  in 
municipal  industries.  When  the  cities  show  the  willingness  and 
the  ability  to  create  a  truly  efficient  civil  service  the  field  may  not 
be  so  difficult  for  public  administration  of  the  public  services, 
but  until  such  a  move  is  not  only  advocated  but  carried  out  in 
good  faith,  any  increase  in  the  activities  of  a  city  only  opens 
a   longer  payroll   for  exploitation  by  the   "boss." 

This  fact  is  so  patent  in  the  history  of  American  municipal 
industries  that  it  is  worth  while  to  illustrate  it  from  one  of  the 
most  conspicuous  examples — the  notorious  experience  of  Phil- 
adelphia in  the  management  of  her  own  gas  works.  Hardly  a 
branch  of  this  now  famous  experiment  failed  to  show  signs  of 
exploitation  for  political  ends. 

The  first  account  to  be  attacked  was,  of  course,  that  promis- 
ing the  greatest  number  of  positions  to  clamoring  political  de- 
pendents.    This    was    the    labor   list    in    the    manufacturing    and 


154  SELECTED    ARTICLES 

distributing  departments.  High  wages  were  paid — twenty-five 
per  cent  over  the  price  for  labor  on  the  open  market.  The  chief 
of  the  gas  bureau  was  constantly  besieged  by  the  friends  of 
various  councilmen  in  search  of  easy  work  at  high  prices.  The 
lists  were  padded  with  a  number  of  laborers  far  beyond  the  actual 
needs  of  the  plant.  So  many  were  there  indeed  that  it  is  asserted 
that  had  all  the  employees  been  stood  shoulder  to  shoulder, 
room  could  not  be  found  for  all  of  them  at  one  time  on  the 
grounds  of  the  plant.  Naturally,  under  such  conditions  there 
was  shirking  of  work  on  all  sides,  and  some  favored  ones 
turned  up  at  the  works,  it  was  said,  only  on  pay  day.  The 
amount  of  work  each  had  to  do  varied  in  accordance  with  the 
influence  of  his  friends  in  councils.  Receiving  these  easy  jobs 
from  the  political  boss,  the  employees  were  in  turn  exploited  by 
him  by  means  of  semi-annual  "voluntary  contributions"  to  the 
party  in  power.  * 

The  purchasing  and  selling  accounts  were  likewise  abused. 
Coal  was  bought  from  favored  firms  only,  the  residual  tar  and 
ammonia  always  went  to  a  single  firm,  though  nominally  sold  to 
the  highest  bidder.  In  practice  there  was  but  the  one  bidder. 
When  another  bidder  on  one  occasion  put  in  a  bid  higher  than 
that  of  the  regular  contractor  the  award  was  not  given  him  '"be- 
cause he  did  not  have  the  facilities  for  handling  the  product."  The 
coke  was  disposed  of  through  a  member  of  select  council.  The 
charges  entered  under  the  blanket  account  of  "miscellaneous" 
exceeded  $100,000  a  year,  and  there  were  large  amounts  charged 
against  such  accounts  as  "ice,"  "matches"  and  "drugs  and  horse 
medicine." 

The  works  were  exploited  indirectly  also.  Councils  were  anxious 
to  cut  down  all  appropriations  for  improvements  and  extensions 
in  order  to  turn  as  large  an  amount  as  possible  into  the  treasury 
as  "profits  of  the  works."  This  would  enable  them  to  keep  down 
the  general  tax  rate  and  have  money  for  more  favored  plans,  but 
it  had  a  disastrous  effect  upon  the  general  condition  of  the  plant. 
Small  and  rotten  mains  and  service  pipes  were  left  unrenewed, 
thus  causing  a  leakage  in  some  years  of  as  much  as  thirty  per 
cent  of  the  gas  manufactured.  Antiquated  machinery  was  kept 
in  use  through  the  refusal  of  councils  to  put  in  modern  ap- 
pliances— a  practice  which  cost  the  city  in  wasteful  methods  of 


MUNICIPAL   OWNERSHIP  155 

production  far  more  than  would  have  been  the  cost  of  new  ap- 
paratus. Councils  even  went  so  far  as  to  cut  down  very  mate- 
rially the  use  of  the  gas  for  public  lighting'.  In  the  place  of  the 
public  gas  lamps  light  was  bought  at  high  prices  from  gasoline 
and  electric  lighting  companies.  These  were  private  concerns  in 
which  councilmen  and  others  prominent  in  local  politics  were 
interested. 

In  a  w^ord,  the  management  of  almost  every  branch  of  the 
public  gas  works  was  dictated  by  politics.  Not  only  the  heads 
of  departments,  but  every  employee  from  the  top  to  the  bottom 
of  the  labor  account  threw  his  whole  intiuence  into  political  af- 
fairs. The  tenure  of  the  party  in  power  marked  the  tenure  of 
office  of  the  employees.  Such  was  the  experience  of  Philadelphia 
in  the  management  of  a  municipal   industry. 

It  is  not  contended  that  this  is  in  all  respects  a  typical  case 
and  that  the  same  thing  would  occur  in  every  detail  in  all  our 
American  cities  did  they  undertake  similar  services.  That  such 
is  not  the  case  is  proven  by  the  experience  of  some  of  our  cities 
in  similar  enterprises.  But  the  example  is  given  to  show  what  has 
actually  occurred  in  one  of  the  most  important  experiments  in 
municipal  ownership  in  America.  The  circumstances  of  other 
American  cities  are  not  so  different  as  to  overthrow  the  pre- 
sumption that  the  possibility  of  similar  abuses  exists  there  also, 
though  not  perhaps  in  the  same  degree  as  in  the  above  instance. 
The  example  is  given  only  to  drive  home  the  argument  that 
under  present  conditions  it  is  entirely  possible  for  politics  to 
play  quite  as  large  a  part  in  the  management  of  public  services 
when  under  public  as  when  under  private  control. 

This  being  the  actual  state  of  affairs,  the  important  question  to 
be  answered  is :  In  which  way  can  the  connection  of  the  pujjlic 
services  and  politics  be  more  easily  minimized.  If  public  owner- 
ship is  to  be  chosen  radical  measures  must  be  adopted  to  remove 
all  control  of  the  municipal  industries  from  possibility  of  political 
interference.  To  widely  extend  the  functions  of  city  government, 
thereby  increasing  the  temptation  to  abuse  of  patronage,  seems  in 
itself  to  introduce  an  element  making  it  increasingly  difficult  to 
keep  a  civil  service  system  on  a  strictly  non-partisan  basis. 

The  other  alternative  is  to  elect  representatives  of  such  char- 
acter as  to  command  public  confidence  and  who  will  be  able  to 


156  SELECTED    ARTICLES 

guard  the  city's  interests  in  making  arrangements  with  con- 
tracting companies.  Each  of  these  methods  carries  with  it  the- 
possibility  of  honest  management.  On  the  point  of  integrity 
there  would  be  little  to  choose  between  the  two,  carried  on  under 
ideal  conditions.  Improvement  over  present  conditions  must 
in  either  case  come  through  raising  the  character  of  the  repre- 
sentatives. A  simple  change  from  one  set  of  machinery  to  the 
other    will    accomplish    nothing. 

The  jioint  then  is :  Is  it  easier  to  elect  men  who  will  be 
judges  of  a  fair  contract  or  men  who  will  be  able  to  run  our 
municipal  industries  at  a  standard  of  efficiency  equal  to  the 
average  of  private  management.  The  former  seems  much  more 
easy  of  attainment  than  the  latter.  The  chances  of  our  getting^ 
by  popular  vote  a  man  with  intelligence  to  determine  the  pro- 
visions of  our  contracts  seem  much  greater  than  our  chances  of 
getting  men  specially  suited  by  experience  and  education  to  carry- 
on  our  municipal  industries.  The  average  man  can  choose  work 
for  the  carpenter  to  do  and  judge  the  work  when  done  much 
better  than  he  can  do  the  work  himself.  SimiIarl3^  the  average 
representative  can  choose  the  terms  upon  which  the  city  will 
have  its  work  done  and  can  judge  w'hether  it  has  been  done  ac- 
cording to  the  agreement  much  easier  than  he  can  carry  out  the 
plan  himself.  If  the  representatives  of  the  people  cannot  be  trust- 
ed to  make  fair  terms  with  a  contracting  company  how  can  they 
be  trusted  with  the  entire  management  of  an  industrial  enterprise? 

There  is  but  one  limit  to  the  power  of  the  public  to  regulate 
the  conditions  upon  which  they  will  give  the  public  services  into 
the  hands  of  private  companies — a  fair  return  to  capital.  What 
is  a  fair  return  is,  again,  largely  settled  by  the  conditions  offered 
in  the  contract.  If  the  agreement  is  so  strict  as  to  make  it 
impossible  to  raise  the  earnings  of  the  company  above  the  average 
of  industrial  undertakings  in  the  community  then  it  is  clear  that 
the  city  must  hold  itself  ready  to  guarantee  that  the  earnings 
shall  reach  that  standard.  Otherwise  capital  will  of  course  re- 
fuse to  take  up  the  project.  In  case  the  municipality,  on  the  other 
hand,  does  not  care  to  assume  the  chance  of  loss  by  the  company 
it  must  be  prepared  to  grant  a  larger  possible  rate  of  return  in 
exchange  for  its  freedom  from  liability. 


MUNICIPAL   OWNERSHIP  157 

Within  these  Hmits  the  city  may  take  all  necessary  measures 
to  protect  its  interests  in  its  public  services.  The  more  clearly  the 
city  evinces  its  desire  to  guard  its  own  interests  and  at  the  same 
time  to  grant  to  the  private  company  a  reasonable  rate  of  in- 
come and  to  protect  it  from  unreasonable  interference  with  that 
income,  the  less  will  be  the  desire  and  the  temptation  of  the 
company  to  interfere  with  local  political  affairs. 

Such  an  agreement  would  secure  to  the  city  all  the  advantages, 
claimed  by  the  advocates  of  municipal  operation  without  the  in- 
ceased  responsibility  of  direct  management.  A  municipally- 
operated  plant  would  in  any  case  withdraw  from  other  branches 
of  industry  the  same  amount  of  capital  as  would  be  employed  in 
the  enterprise  bj'  a  private  corporation.  The  interest  on  that 
capital  must  in  the  one  case  just  as  surely  as  in  the  other  finally 
be  paid  by  the  community  at  large. 

The  choice  between  the  two  methods  of  operating  the  munic- 
ipal services  must  depend  not  on  what  may  be  accomplished  under 
ideal  conditions,  but  upon  the  likelihood  of  efficiency  under  pres- 
ent conditions. 

Under  American  conditions  to-day,  then,  the  entrepreneur 
would  maintain  that : 

1.  The  direct  responsibility  present  imder  private  manage- 
ment makes  it  possible  for  a  higher  degree  of  efficienc}^  to  be  ob- 
tained than  under  public  operation. 

2.  The  stimulus  of  gain  can  be  made  a  more  powerful  element 
working  for  efficiency  in  all  branches  of  operation  under  private- 
than  under  public  control. 

3.  The  influence  of  politics  upon  the  public  services  can  be 
lessened  more  easily  by  having  the  representatives  determine  the 
terms  upon  which  the  city  services  shall  be  let  out  under  contract 
than  by  turning  the  entire  administration  of  the  services  over  to 
the  representatives. 

4.  By  the  granting  of  contracts  clearly  safeguarding  both  the 
interests  of  the  city  and  the  investor  the  management  of  the 
public  services  may  be  brought  to  the  highest  degree  of  simplicity,, 
economy  and  efficiency. 


158  SELECTED    ARTICLES 

Journal  of  Commerce.  July  i6,  1907. 

Main  Question  in  Municipal  Ownership. 

The  chief  motive  of  men  in  this  age  is  that  of  self-interest 
in  one  form  or  another.  It  is  not  only  natural  but  indispensable 
to  success  and  progress  and  needs  only  to  be  guided  by  sound 
principles.  In  the  expenditure  of  capital  and  the  exertion  of 
enterprise,  skill  and  economy  in  any  service  to  the  community, 
and  all  industry  and  business  is  in  some  sense  a  service  to  the 
community,  the  main  incentive  is  profit  or  compensation  depen- 
dent upon  the  efforts  of  those  concerned.  Men  do  not  exert 
themselves  for  nothing,  or  for  their  health,  but  for  gain.  In  pro- 
viding a  direct  service  like  that  of  furnishing  light,  electric  power 
or  transit  facilities  which  is  in  its  nature  a  commercial  business, 
the  main  question  is  whether  men  will  do  it  better  with  their 
own  capital  and  under  their  own  management,  with  the  incentive 
of  gain  for  themselves,  or  by  the  use  of  capital  supplied  from 
the  public  treasury,  under  the  direction  of  public  officials  with 
fixed  salaries  for  themselves.  Will  the  public  officials  nominated 
by  political  organizations  and  elected  by  popular  vote  be  best 
qualified  to  exercise  control  over  the  business,  and  will  the  men 
employed  by  them  and  subject  to  their  authority  be  those  most 
capable  for  the  work?  Under  which  condition  here  suggested  are 
men  of  special  ability,  of  energy,  of  experience  and  mastery  in 
the  business,  more  likely  to  be  engaged  in  it?  Under  which  is 
there  more  likely  to  be  alertness  in  extending  the  business  to 
meet  every  demand,  in  adopting  improved  methods,  in  economiz- 
ing cost  and  increasing  results?  Reason  and  experience  give  the 
same  answer  to  these  questions. 

No  doubt  private  self-interest  in  this  service  needs  to  be 
under  restraint  and  regulation  and  prevented  from  making  illegit- 
imate gains  or  rendering  inadequate  service,  but  its  motives  can- 
not be  dispensed  with  without  paralyzing  the  main  springs  of  ac- 
tion in  a  business  requiring  expert  ability,  sustained  effort  and 
vigilant  direction,  such  as  no  political  system  with  which  we  are 
acquainted  will  afford.  If  the  public  is  to  furnish  the  capital  and  the 
credit  and  take  the  risks  of  gain  or  loss,  while  the  men  in  charge 
of  the  service  have  no  direct  stake  in  it,  are  not  chosen  for  their 


MUNICIPAL   OWNERSHIP  159 

experience  or  fitness  and  are  paid  without  reference  to  results,  it 
stands  to  reason  that  the  practical  results  will  prove  costly  and 
unsatisfactory,  and  experience  has  verified  the  dictates  of  reason 
in  this  respect.  There  has  been  corruption  in  obtaining  franchises 
by  men  seeking  the  privilege  of  employing  capital  and  energy  in 
providing  these  public  utilities,  but  the  opportunities  and  the 
temptations  for  corruption  would  be  vastly  greater  if  that  busi- 
ness were  made  the  object  of  political  quest  and  political  control. 
The  scandals  of  the  franchise  abuses  would  pale  into  insignificance 
in  comparison  with  those  of  municipal  abuses  with  millions  of 
money  and  great  forces  of  workmen  at  command,  and  the  prac- 
tical and  financial  results  would  be  more  deplorable  and  more 
difficult  to  remedy  than  those  we  are  already  burdened  with  in 
the  administration  of  city  affairs.  No  large  city  in  this  country 
has  yet  gone  far  enough  to  demonstrate  this,  but  every  step  has 
tended  that  way.  Private  enterprise  and  the  motives  that  give  it 
force  need  everywhere  to  be  under  the  restraint  of  the  law  to  se- 
cure rights  and  prevent  wrongs,  but  it  is  the  most  effective  power 
we  have,  and  every  effort  to  displace  it  with  oflficialism  and 
socialism  tends  to  degeneration. 


Review  of  Reviews.  36:  594-8.  November,  1907. 

How  Boston  Solved  the  Gas  Problem.    Louis  D.  Brandeis. 

While  this  investigation  (National  Civic  Federation)  was 
proceeding,  Massachusetts  entered,  in  connection  with  the  Boston 
gas  supply,  upon  an  experiment,  new  in  America,  which  may  lead 
to  the  best  practical  solution  of  the  public-utilities  problem.  The 
new  Boston  system  creates  substantially  a  partnership  between 
the  public  and  the  stockholders  of  the  gas  company, — a  partner- 
ship in  which  the  public  will  secure  an  ever-increasing  share  of 
the  profits  of  the  business. 

Twenty  Per  Cent.  Reduction  in  Two  Years. 

This  system  has  already  given  to  Boston  8o-cent  gas,  although 
Boston  is  located  many  hundred  miles  from  the  mines  which 
supply  its  coal.     Eighty   cents  is  a  lower  price   for  gas   than  is 


i6o  SELECTED    ARTICLES 

actually  enjoyed  by  any  other  city  in  the  United  States,  except 
a  few  within  the  coal  and  oil  region,  like  Cleveland  or  Wheeling, 
and  Redlands  and  Santa  Ana,  Cal.  Ev^en  in  those  cities  the  price 
is  not  lower  than  75  cents, — a  price  which  Boston  may  reasonably 
expect  to  attain  soon.  For,  during  the  two  years  ending  July  i, 
1907,  four  reductions  in  price  each  of  5  cents  have  been  made.  To 
Tiave  reduced  the  price  of  gas  20  per  cent,  during  that  period  of 
generally  rising  prices  in  labor  and  materials  is  certainly  a  notable 
achievement.  The  most  recent  reductions  in  price  were  the 
wholly  voluntary  acts  of  the  company,  made  under  wise  laws 
framed  in  the  interest  both  of  the  public  and  of  the  stockholders. 
The  saving  to  the  gas  consumer  by  these  reductions  was  in  the 
first  year  $265,404.55,  in  the  second  year  $565,725.60,  and  will  be 
in  the  third   (the  current)   year  about  $800,000. 

Earnings  Unimpaired ;  A  Comparison  With  New  York. 

That  this  saving  to  the  consumer  was  not  attained  by  a  sac- 
rifice of  the  interests  of  the  stockholder  may  be  inferred  from  the 
market  price  of  the  stock  of  the  association  which  controls  the 
gas  company.  In  the  two  years  following  the  legislation  of 
1905,  a  period  in  which  most  other  stocks  depreciated  largely,  the 
common  stock  of  the  Massachusetts  Gas  Companies  rose  from 
44/'2  to  57>2 ;  and  even  in  the  severe  stock  depression  of  late 
September.  1907,  this  stock  was  firm  at  52. 

Compare  with  the  results  of  the  Boston  experiment  the  at- 
tempt in  New  York  City  made  at  about  the  same  time  to  reduce 
the  price  of  gas  from  $1  to  80  cents  by  legislative  fiat  and  the 
compulsory  orders  of  the  State  commission.  The  Xew  York 
company  contended  that  the  law  was  unconstitutional ;  the  fed- 
eral court  issued  an  injunction;  the  consumer  still  pays  out  $1 
for  each  1000  feet  of  gas ;  and  the  market  price  of  the  stock  of 
the  Consolidated  Gas  Company  of  New  York  fell  during  the 
same  period  of  two  years  from  200  to  118,  and  in  late  September, 
1907,  to  9634. 

But  Boston  has  reaped  from  the  sliding  scale  system  as  ap- 
plied under  President  Richards'  administration  of  the  company 
far  more  than  cheaper  gas  and  higher  security  values.  It  has 
been  proved  that  a  public-service  corporation  may  be   managed 


MUNICIPAL   OWNERSHIP  i6i 

■with  political  honesty,  and  yet  successfully,  and  that  its  head 
may  become  a  valuable  public  servant.  The  officers  and  em- 
ployees of  the  gas  company  now  devote  themselves  strictly  to  the 
business  of  making  and  distributing  gas,  instead  of  dissipating 
their  abilities,  as  heretofore,  in  lobbying  and  political  intrigue. 
As  a  result,  gas  properties  which  throughout  the  greater  part  of 
twenty  years  had  been  the  subject  of  financial  and  political 
scandals,  developing  ultimately  bitter  hostility  on  the  part  of  the 
people,  are  now  conducted  in  a  manner  so  honorable  as  to  de- 
serve and  to  secure  the  highest  public  commendation. 

Moderate  Capitali::ation. 

The  aggregate  outstanding  securities  of  the  constituent  com- 
panies had  a  par  value  of  only  $15,124,121  (of  which  $9,309,600 
was  stock  and  $5,814,521  funded  debt).  But  when,  in  1904,  ap- 
plication was  made  under  the  act  to  fix  the  capital,  the  companies 
claimed  that  the  properties  had  recently  cost  the  then  owners  over 
^24,000,000,  that  their  replacement  value  was  about  the  same 
amount,  and  that  the  fair  value  for  capitalization  should  be  not 
less  than  $20,609,989.99.  The  Public-Franchise  League,  on  the 
other  hand,  contended  that  substantially  any  excess  in  value  over 
the  $15,124,121  represented  not  contributions  by  stockholders, 
but  accumulations  from  excessive  payments  exacted  from  gas 
consumers ;  that  in  the  reorganization  of  the  business  such  value 
should  not  be  capitalized ;  and  that  the  Consolidated  Company's 
capital  stock  should  therefore  be  limited  to  the  aggregate  of  the 
capital  of  the  constituent  companies  then  outstanding,  plus  such 
additional  amount  of  stock  as  it  might  be  necessary  to  issue  at 
its  estimated  market  value  (which  was  above  the  par  value)  to 
provide  funds  for  paying  off  all  existing  indebtedness.  The 
League  deemed  the  retention  of  the  original  capital  so  augument- 
■ed  of  fundamental  importance,  mainly  because  the  payment  of  a 
high  rate  of  dividend  on  a  small  capital  issue  would  tend  to  keep 
the  public  vigilant. 

After  a  long  and  bitter  struggle  the  gas  companies,  acting 
imder  the  enlightened  and  able  leadership  of  jMr.  Richards, 
agreed,  in  1905,  with  the  Public-Franchise  League  upon  legisla- 
tion which  provided  that  the  capital  of  the  consolidated  company 


i62  SELECTED    ARTICLES 

should  be  limited  to  the  aggregate  par  value  of  the  outstanding- 
stock  and  funded  indebtedness  of  the  constituent  companies,  ta 
wit:  $15,124,000;  that  the  maximum  price  of  gas  in  Boston  should 
be  reduced  to  90  cents  within  twelve  months  after  the  consolida- 
tion was  affected ;  and  that  the  Governor  should  appoint  a  com- 
mission to  consider  and  report  to  the  next  Legislature  whether 
the  adoption  in  Boston  of  the  so-called  London  sliding-scale  sys- 
tem for  "the  automatic  and  interdependent  adjustment  of  the 
price  of  gas  to  consumers  and  the  rate  of  dividends  to  stock- 
holders of  gas  companies"  was  expedient.  The  favorable  recom- 
mendation of  the  minority  of  this  commission,  Messrs.  James 
E.  Cotter  and  Charles  P.  Hall,  was  supported  by  the  Public- 
Franchise  League  and  the  gas  company,  and  on  Alay  26,  1906, 
the  Sliding-Scale  act  received  Governor  Guild's  approval  in  spite 
of  the  strenuous  opposition   of  both   conservatives  and  radicals. 

TJie  Principle  of  the  Sliding  Scale. 

The  Boston  Sliding-Scale  act,  which  embodies  with  some 
modifications  the  main  provisions  of  the  system  widely  used  in 
England,  provides  as  follows : 

First:  Ninety  cents  per  1000  feet  of  gas  (that  is,  the  maximum 
price  then  actually  charged  by  the  Boston  company)  is  made  the 
"standard  price"  of  gas. 

Second:  Seven  per  cent,  (that  is,  i  per  cent,  less  than  the 
dividend  which  was  then  being  paid  by  the  Boston  company)  is. 
made  the  "standard  dividend." 

Third  :  The  company  is  prohibited  from  paying  more  than  7 
per  cent,  dividend  unless  and  until  one  year  after  it  shall  have 
reduced  the  price  of  gas  below  90  cents,  and  then  may  increase 
its  dividend  at  the  rate  of  i  per  cent,  for  every  5  cents  reduction 
in  price  of  gas. 

Fourth:  New  stock  can  be  issued  only  with  the  consent  of  the 
Gas  and  Electric  Light  Commissioners  and  must  be  sold  at  auc- 
tion at  such  minimum  price  and  under  such  other  conditions  as 
the  commissioners  prescribe. 

Fifth  :  Provision  is  made  for  determining  annually,  and  pub- 
lishing in  detail  in  the  newspapers,  the  cost  of  manufacturing- 
and  distributing  gas. 


MUNICIPAL   OWNERSHIP  163 

Sixth  :  After  the  expiration  of  ten  years,  the  Gas  and  Electric 
Light  Commissioners  may  upon  petition  ''lower  or  raise  the 
standard  price  per  thousand  feet  to  such  extent  as  may  justly  be 
required  by  reason  of  greater  or  less  burden  which  may  be  im- 
posed upon  the  company  by  reason  of  improved  methods  in  the 
art  of  manufacture,  b}*  reason  of  changes  in  prices  of  materials 
and  labor,  or  by  reason  of  changes  in  other  conditions  affecting 
the  general  cost  of  manufacture  or  distribution  of  gas." 

Efficiency  in  Management  Sought. 

The  League  therefore  urged  that  the  possibility  of  a  large  re- 
turn upon  capital  offered  under  the  sliding-scale  system  should  be 
regarded  merely  as  an -incentive  to  securing  for  the  gas  business 
the  kind  of  management  most  likely  to  produce  and  distribute 
gas  at  the  lowest  possible  cost,  and  thus  supply  an  essential  pre- 
requisite to  cheap  gas.  Protection  against  corporate  abuses 
demands  for  gas  companies  strict  supervision  and  publicity. 
Eairness  demands  that  proper  compensation  be  made  in  some 
form  for  the  use  of  our  streets.  But  no  self-sustaining  system 
of  supplying  gas  can  give  to  the  people  cheap  gas  unless  it  rests 
upon    high    efficiency   in   management. 

The  gas  business  has  many  of  the  characteristics  of  both 
manufacturing  and  merchandising.  Like  other  manufacturing 
businesses,  it  produces  an  article  for  sale.  The  cost  of  its  product 
is  dependent  largely  upon  the  character  and  condition  of  the 
plant;  upon  the  extent  to  which  labor  and  waste-saving  devices 
are  adopted ;  upon  the  skill  with  which  raw  materials  and  sup- 
plies are  purchased  and  waste  or  residual  products  are  disposed 
of ;  and  whether  the  plant  is  operated  to  its  full  capacit}-. 

To  an  even  greater  extent  than  in  most  mercantile  businesses, 
the  pro  rata  cost  of  distribution  of  gas  is  dependent  upon  large 
volume.  The  distributing  plant  requires  an  exceptionally  large 
investment.  But  the  mains  or  pipes  are  rarely  used  to  their  full  ca- 
pacity. The  interest,  depreciation,  and  maintenance  charges  are 
the  same  whatever  the  volume  of  sales.  The  inspection  of  meter, 
and  many  other  charges,  increase  but  slightly  with  the  increase 
of  sales.  The  pro  rata  cost  of  distributing  gas  diminishes  largely, 
therefore,  with  the  increase  in  the  quantity  sold.  But,  as  in  most 
mercantile  businesses,  the  quantity  of  gas  which  can  be  sold  in 


i6a  selected  articles 

any  of  our  large  cities  is  dependent  mainly  upon  the  skill,  energy, 
initiative,  and  intelligence  with  which  the  business  is  conducted. 
The  demand  for  gas  is  not  a  fixed  quantity.  There  is,  undoubt- 
edly, a  minimum  quantity  which  will  be  used  under  almost  any 
conceivable  circumstances.  But  limits  can  scarcely  be  set  to  the 
possible  increase  of  its  use  in  our  large  cities.  Xot  only  is  there 
an  ever-growing  demand  for  intense  artificial  lighting  of  public 
places,  stores,  and  residences,  but  there  is  an  almost  limitless 
field  now  occupied  by  electric  light,  coal,  and  oil,  of  which  gas  is 
the  natural  competitor.  The  limits  of  the  use  of  gas  in  any  city, 
therefore,  will  be  set  mainly  by  the  skill,  energy,  and  initiative  of 
those  who  manage  the  business,  and  by  the  extent  to  which  they 
appreciate  the  fact  that  increased  use  of  gas  will  result  from  re- 
duction in  price,  bettering  of  appliances,  and  improving  facilities. 
A  management  possessing  the  requisite  ability  and  skill  for 
such  a  business  and  which  w^ould  exerci-e  the  requisite  vigilance 
and  energy  may  be  best  secured  by  following  those  lines  upon 
which  the  remarkable  industrial  advance  of  America  has  pro- 
ceeded, the  lines  of  intelligent  self-interest.  Those  who  manage 
our  gas  companies  and  other  public  service  corporations  should 
be  permitted,  subject  to  the  limitations  stated  above,  to  conduct 
the  enterprise  under  the  conditions  which  in  ordinary  business 
have  proved  a  sufficient  incentive  to  attract  men  of  large  ability, 
and  to  insure  from  them  their  utmost  efforts  for  its  advancement. 
These  essential  conditions  are  : 

A.  The  right  to  enjoy  a  fair  share  of  the  fruits  of  successful 
effort. 

B.  The   opportunity   of  devoting  one's   whole   efforts   to   de- 
veloping the  business. 

C.  The  probability  of  pursuing  for  a  reasonable  time  with- 
out interruption  such  business  policy  a?  may  be  adopted. 

Journal  of  Political  Economy.  14:  257-314.  May,  1906. 

Municipal  Ownership  in  Great  Britain.     Everett  W.  Burdett. 

/.     Is  It  Successful f 

For  the  purposes   of  this   article   I   shall   assume   that,   in   the 
generation  and  supply  of  electricity  for  lighting,  the  municipalities 


MUNICIPAL  ..OWNERSHIP  165 

of  England  and  Scotland  have,  upon  the  whole,  been  measur- 
ably successful  in  furnishing  a  fair  article  at  a  fair  price.  Tak- 
ing all  the  figures  together,  Mr.  R.  S.  Hale,  of  Boston,  a  compe- 
tent statistician  and  engineer,  after  careful  consideration,  con- 
cludes that  there  has  been  a  difference  in  favor  of  the  consumer  in 
the  results  which  have  been  obtained  from  the  municipal,  as  con- 
trasted with  the  private,  supply  of  electricity  for  lighting — a 
difference,  however,  which  is  not  so  large  as  not  to  be  creditable 
to  the  companies,  in  view  of  the  handicaps  under  which  they 
have  been  obliged  to  operate,  to  which  I  shall  presently  allude. 
Moreover,  with  the  exception  of  metropolitan  London,  practically 
all  of  the  private  plants  are  in  very  small  cities,  while  the  great 
bulk  of  the  municipal  plants  are  in  larger  cities. 

Another  fact  to  be  borne  in  mind  in  this  connection  is  that, 
in  some  important  instances,  the  showing  which  municipal  plants 
have  been  able  to  make  has  been  materially  assisted  by  the 
circumstance  that  the  going  plants  and  business  of  private 
companies  have  been  taken  over  by  the  municipalities,  which 
have  thus  reaped  the  benefits  of  individual  initiative  and  devel- 
opment. This  is  conspicuously  true  of  Leeds  (population  390,000 
in  1896)   and  Liverpool    (population  517,951  in  1896). 

But  the  success  of  municipal  undertakings  in  the  supply  of 
■electricity  for  light  has  been  confined  to  the  single  feature  above 
named,  and  has  resulted  solely  to  the  benefit  of  comparatively 
few  consumers,  and  not  to  that  of  the  general  public.  It  has 
likewise  been  accompanied  by  failures  in  other  directions,  to  be 
presently  mentioned,  which  more  than  counterbalance  the  single 
favorable    feature    above    referred    to. 

There  is  nothing  to  show,  and  there  is  no  reason  to  assume, 
that  the  electric  supply  in  Great  Britain  could  not  have  been 
furnished  by  private  companies  as  satisfactorily  and  as  cheaply 
as  has  been  done  by  municipalities,  if  they  had  had  the  oppor- 
tunity. Where  (in  a  very  few  instances)  they  have  had  such 
opportunity  the  results  have  been  about  the  same  or  better ;  and 
if  there  are  any  differences  against  them,  they  are  amply  ac- 
counted for  by  the  difference?  in  conditions  under  which  private 
and  public  lighting  enterprises  are  by  law  conducted  in  Great 
Britain. 


i66  SELECTED    ARTICLES 

//.     Detrimental  Consequences  of  Municipal  Ownership. 

If  it  be  assumed  that  the  public  supply  of  electricity  has  been 
successful  in  the  single  particular  above  referred  to,  it  has  been 
attended  with  other  consequences  of  a  most  detrimental  character. 

I.    HAMPERIXG   AND   RESTRICTION    OF   THE    INDUSTRY. 

The  first,  and  perhaps  the  most  serious,  of  these  consequences 
has  been  the  undoubted  hampering  and  restriction  of  the  growth 
and  development  of  the  electrical  industry,  as  a  whole,  in  Great 
Britain — resulting,  as  I  shall  presently  show,  from  the  peculiar 
manner  in  which  the  laws  applicable  to  the  subject  have  favored 
the  municipal  and  discouraged  the  private  exploitation  of  the 
industry. 

The  backwardness  of  the  development  of  the  electrical  in- 
dustry, as  a  whole,  in  Great  Britain  is,  I  think,  practically  ad- 
mitted on  all  sides ;  if  not  admitted,  it  is  readily  demonstrable. 
So  serious  was  this  state  of  things  that  in  1902  the  Council  of 
the  Institution  of  Electrical  Engineers  of  England  appointed  a 
committee  "to  determine  whether  they  can  recommend  the  coun- 
cil to  take  any  action,  and,  if  so,  what  action,  that  would  assist 
the  industry."  The  inquiry  was  based  upon  facts  set  forth  in  a 
paper  written  by  Mr.  W.  L.  Magden,  published  in  the  Journal  of 
the  Institution  of  Electrical  Engineers,  1900.  The  Institution 
of  Electrical  Engineers  was  composed  of  men  connected  with 
both  public  and  private  electrical  enterprises,  seeking  only  an  en- 
largement of  the  field,  however  that  result  might  best  be  brought 
about,  including  such  eminent  men  in  the  profession  as  Professor 
W.  E.  Ayrton,  F.  R.  S.,  jMajor  P.  Cardew,  R.  E.,  Lieutenant- 
Colonel  R.  E.  Crompton,  C.  B.,  Air.  S.  Z.  Eerranti,  Professor 
J.  Perr}',  F.  R.  S.,  ]\Ir.  A.  Siemens,  Professor  Silvanus  P. 
Thompson,  F.  R.  S.,  and  others.  Their  qualifications  to  pass 
upon  this  subject  amply  appear  from  the  proceedings  of  the  com- 
mittee, which  were  published  by  the  Institution. 

After  taking  the  evidence  of  various  people  competent  to 
speak  upon  the  subject,  including  both  those  in  "favor  of  as  well 
as  those  opposed  to  the  municipal   operation  of  electric-lighting 

and  tramway  plants,  the  committee  reported : 

That,  while  taking  divers  views  of  subsidiary  questions,  the 
witnesses  were  practically  unanimous  in  their  conviction  that  elec- 
trical enterprise  has  not  attained  the  stage   of  industrial  develop- 


MUNICIPAL   OWNERSHIP 


167 


ment  in  this  country  which  might  fairly  have  been  expected,  hav- 
ing regard  to  the  many  favorable  natural  conditions,  and  having 
regard  also  to  the  achievements  of  British  capital,  labor,  and  in- 
ventive genius  in  so  many  other  branches  of  the  mechanical  arts. 

And   among   the   resolutions   adopted   by  the   committee    (March 

25,  1902)   was  the  following: 

That,  notwithstanding  that  our  countrymen  have  been  among 
the  first  in  inventive  genius  in  electrical  science,  its  development  in 
the  United  Kingdom  is  in  a  backward  condition,  as  compared  with 
other  countries,  in  respect  of  practical  application  to  the  industrial 
and  social  requirements  of  the  nation. 

These  conclusions  are  amply  borne  out  by  the  facts  in  evi- 
dence, and  others  which  are  readily  obtainable.  The  most  strik- 
ing and  convincing  figures  were  submitted  by  Mr.  Philip  Dawson, 
E.  E.,  found  on  p.  183  of  the  report.  They  included  the  fol- 
lowing : 

Comparative  Approximate  Figures  as  to  Electric  Lighting,  Power, 

AND  Traction,  1901 


71 

en 

-♦-» 
■^  1- 

a  0 

'u 

cal 
city 

ts 

c  >> 

1 

Country 

Station  Kilow 
Available  f  < 
Lighting  an 
Power 

g     Station  Kilow 
0         Available  f 
§            Traction 

Miles  of  Sin 

Track  Electric 

Equipped 

No.  of  Elect 
Cars 
Running 

Total  Electr 

Station  Capa 

in  Kilowat 

Total  Appro 

mate  Capit 

Invested 

Great  Britain 

200,000 

900 

2.600 

250,000 

40,000,000 

$35,000,000 

Continental  Europe 

400,000 

154,600 

5,000 

9.800 

550,000 

350,000,000 

85,000,000 

U.  S.  of  America. 

1,200.000 

800,000 

21,000 

68.000 

2,000,000 

70,000,000 

200,000,000 

Thus  it  is  seen  that  the  United  States,  with  less  than  double 
the  population  of  Great  Britain,  has  six  times  the  amount  of 
apparatus  installed  for  furnishing  electric  light  and  power,  six- 
teen times  as  much  for  electric  traction,  twenty-three  times  as 
many  miles  of  electric  railway,  twenty-six  times  as  many  motor 
cars,  and  five  and  one-half  times  as  much  money  invested  in 
such  enterprises. 

2.     DISCOURAGEMENT    OF    PRIVATE    INVESTMENT. 

The  limitation  of  the  industry  above  described  has  resulted 
not  only  in  postponing,  and  in  some  instances,  in  excluding,  a 
supply  of  electricity  for  lighting  and  for  traction  in  a  large  num- 
ber of  cities  and  towns,  but  also  in  the  limitation  of  the  investing 
classes  interested  in  the  development  of  the  industry,  and  in  the 
minimizing  of  the  number  and  importance  of  the  establishments 


i68  SELECTED    ARTICLES 

for  the  manufacture  of  the  electrical  machinery  and  apparatus 
which  would  have  been  necessary  in  case  of  larger  develop- 
ment. The  latter  feature  of  the  situation  is  strikingly  illustrated 
by  contrasting  it  with  the  enormous  size  and  importance  of 
such  manufacturing  establishments  in  the  United  States  and 
Germany. 

An  Englishman  has  well  said  : 

The  idea  of  thrift  should  be  encouraged  as  far  as  possible.  It  is 
of  immerse  national  value.  .  .  .  The  possibility  of  small  invest- 
ment, and  thus  an  important  inducement  to  thrift,  is  greatly 
diminished  by  the  municipality  indulging  in  business  which  would 
be  carried  on  otherwise  by  associations  of  individuals  who  would 
raise  capital  from  the  community  generally  by  shares. 

Without  private  capital  and  skill  new  industrial  enterprises 
do  not  receive  that  impetus  and  development  which  they  other- 
wise would.  Public  officials  do  not  invent,  exploit,  or  develop 
new  things,  but  leave  the  field  of  discovery,  initiation,  and  devel- 
opment to  private  persons  actuated  by  the  hope  of  large  rewards. 

Whatever  may  be  the  result  of  the  prosecution  by  the  public 
or  its  representatives  of  an  enterprise  which  has  been  founded 
and  put  on  its  feet  by  individuals,  it  is  doubtful  if  any  case  of 
successful  municipal  initiation  of  such  an  enterprise  can  be  cited. 
Individual  initiative  is  always  necessary.  Sir  Richard  Webster, 
then  attorney-general  of  England,  called  it  "the  absolute  neces- 
sity of  inventive  competition."  Water  supplies,  gas  supplies, 
transportation,  electricity,  even  in  England,  all  owe  their  initia- 
tive to  private  enterprise.  Only  twelve  important  towns  in  Eng- 
land built  their  own  water-works.  Gas  supply  was  in  private 
hands  exclusively  at  first,  and  it  was  nearly  or  quite  fifty  years 
before  it  went  largely  into  the  hands  of  municipalities.  Most,  if 
not  all,  tramway  undertakings  which  are  controlled  by  munici- 
palities today  were  originally  established  by  private  enterprise 
and  subsequently  taken  over  by  public  authorities. 

The  same  is  true  of  electricity.  The  towns  and  cities  with 
gas  plants  on  their  hands  were  literally  forced  into  the  supply  of 
electricity  to  head  off  private  enterprise.  But,  notwithstanding 
this,  private  enterprise  started  electric  companies  in  London, 
Liverpool,  Sheffield,  Birmingham,  Nottingham,  Newcastle,  and 
other  principal  towns  in  England. 

3.      INADEQUATE  DISTRIBUTION   OF  .SUPPLY. 

The  third   particular  in  which   municipal   supply  has   worked 


AIUNICIPAL   OWNERSHIP 


169 


badly  in  Great  Britain  is  the  inadequate  distribution  of  the  sup- 
ply in  places  where  supply  has  been  undertaken.  This  has  re- 
sulted in  the  accommodation  of  the  few  at  the  expense  of  the 
many.  The  non-consumer  (who  is  legion)  gets  no  benefit;  the 
consumers  (who  are  comparatively  few)  get  all  the  benefit.  I 
take  it  to  be  an  indisputable  economic  proposition  that  the  char- 
acter of  a  public  service  is  to  be  judged  of  by  its  extent  quite  as 
much  as  by  its  cost.  It  is  better  service,  for  example,  to  supply 
100,000  people  wnth  dollar  gas  than  to  supply  10,000  or  50,000 
of  the  same  people  with  50  cent  gas ;  or  to  furnish  railway  facili- 
ties to  the  larger  number  at  5  or  6  cents,  than  to  the  smaller  num- 
ber at  3  cents.  Unless  public  service  is  available  to  the  greatest 
possible  number,  it  fails  to  just  the  extent  that  it  is  not  so  avail- 
able. This  is  strikingly  show-n,  with  respect  to  electric-lighting 
service,  in  the  number  of  lamps  installed  and  the  number  of  cus- 
tomers supplied  in  five  characteristic  cities  in  England  and  Scot- 
land, as  contrasted  with  three  principal  cities  in  the  United 
States,  by  the  table  on  the  following  page.  The  figures  given 
are  the  nearest  approximation  possible  from  the  available  data. 
The  total  installation  in  each  case  is  converted  into  its  equivalent 
in  sixteen-candle  power  lamps. 

It  thus  appears  that  the  private  company  in  Boston  alone  has 
almost  as  many  lamps  installed  as  the  total  number  in  the  two 
principal  cities  of   Scotland  and  three  of  the  principal  cities  of 


City 

Population 
Supplied 

No.  of  Lamps 
Installed,    16  C.  P. 

No.  of  Customers 

Glasgow  . 

Edinburgh 

Manchester 

Leeds 

Birmingham 

760  423 
316,479 
543,969 
428,953 
522,182 

403,000 
336,000 
3(iO,000 
154.000 
113.000 

9,324 
7,129 
5,171 
3,988 
2.374 

Total... 

2,572,006 

1,306,000 

27.986 

Boston  -. 

New  York 

Chicago 

573.574 
2,050,600 
1,698,575 

1,114,000 
2,846,700 
1,500,000 

15,136 
50,000  plus 

England,  outside  of  London,  put  together;  and  is  supplying 
more  than  half  as  many  customers  as  those  five  cities  combined. 
Indeed,  the  number  of  customers  supplied  in   Boston  is  almost 


170  SELECTED    ARTICLES 

as  large  as  the  total  number  of  customers  of  the  public  plants 
in  Edinburgh  and  Glasgow  combined.  With  a  population  sup- 
plied one-fourth  smaller  than  that  of  Glasgow,  Boston  has 
nearly  three  times  as  many  lamps  installed,  and  over  60  per 
cent,  more  customers.  As  compared  with  Manchester,  with 
slightly  more  populatiori  supplied.  Boston  has  nearly  four  times 
as  many  lamps  installed,  and  nearly  three  times  as  many  custom- 
ers. Taking  Edinburgh  and  Leeds  together,  with  a  combined 
population  nearly  half  as  large  again,  Boston  has  nearly  two 
and  one-half  as  miany  lights  and  more  than  one-third  more  cus- 
tomers. If  a  comparison  is  made  between  Boston  and  the  two 
cities  of  Glasgow  and  Birmingham,  which  are  perhaps  the  most 
conspicuous  among  the  British  municipal  undertakings,  we  find 
that  while  the  combined  population  of  those  two  cities  is  more 
than  double  that  of  Boston,  they  have  between  them  considerably 
less  than  one-half  the  number  of  lamps  installed,  and  only  about 
three-fourths  as  many  customers. 

If  the  comparison  is  made  with  Birmingham  alone,  that 
birthplace  of  English  municipalism,  with  a  population  supplied 
nearly  as  large  as  that  of-  Boston,  is  found  to  have  only  the 
beggarly  number  of  2,374  customers,  with  113,000  lamps,  as 
against  Boston's  15.136  customers  and  1,114.000  lamps.  The 
ratio  of  customers  is  as  one  to  six,  and  of  lamps  as  one  to  ten. 

Comparing  Boston  and  corresponding  English  cities,  taken 
together,  it  will  be  found  that  three  times  as  many  people  have 
an  electrical  supply  in  the  former  as  in  the  latter ;  that  is  to  say, 
there  are  thirty  takers  of  electricity  in  Boston  for  each  i.ooo  of 
population,  as  against  ten  takers  for  an  equal  population  in  the 
English  cities. 

A  very  striking  illustration  of  the  superior  distribution  of 
electrical  supply  in  England  obtained  by  private  business  man- 
agement, operating  under  reasonably  favorable  conditions,  over 
that  prevailing  in  the  public  service,  is  furnished  by  the  two 
companies  in  Newcastle.  Those  companies  represent  the  best 
development  which  has  been  achieved  in  the  United  Kingdom, 
either  by  private  or  public  undertakings.  The  figures  are  as 
follows : 


MUNICIPAL   OWNERSHIP 


171 


Comparative  Results  of  Private  Ownership  and  Operation  in  Newcastle, 
AND  Public  Ownership  and  Operation  in  Eight  Other  Important  Cities 
of  the  Same  Class  in  Great  Britain 


Population  \ 
(Approxi 
mare) 


No.  of 

Private 

Lights  of 

8C.  P. 


Private     ^9-  of 
Motors,'    '-on- 
1^   p      sumers 


Average 

Price  to 

Public, 

Excluding 

Trams  and 

Street 

Lighting 


Thousands 

of 

K.  W.  H. 

Sold  to 

Public 


Public  plants:- 

Dublin 

West  Ham 

Dundee 

Leicester 

Salford 

Aberdeen 

Cardiff  

Nottingham  .. 

Private  plants- 
Newcastle  


289.000 
267,000 
163,000 
220,000 
220,000 
165,000 
164,000 
239,000 


217,000 


82,000 

84.000 

72,000 

156,000 

122,000 

107,000 

62,000 

206,000 


288,000 


220 

850 

I   670 

1,004 

715 

1,030 

167 

2,240 

2.865 

1,000 

1,871 

1,321 

607 

1.079 

1.913 

2,704 

6,650 

4.160 

3.58 
3.13 
3.52 
3.83 
2.62 
3.65 
3.27 
2.08 

(  1.66 
(2  50 


857 
1,827 
1,073 
1.719 
2,051 
1,581 
1,736 
7,937 


11.684 


(The  figures  in  columns  2,  3,  4,  and  5  are  taken  from  the  Electrician' s  sheet 
for  1904 — 5.  The  figures  in  columns  6  and  7  are  taken  from  Garcke's  'Manual, 
Vol.  IX  (1905).  The  figures  as  to  Nottingham  include  sale  of  current  to  the  city 
tramways. 

From  the  foregoing  the  following  comparisons  appear: 

Average  population  served  by  public  plants 215,875 

Population  served,  by  the  private  plants 217,000 

Average  number  of  customers  of  public  plants   1,403 

Number  of  customers  of  the  private  plants   4,160 

Average  number  of  lights  supplied  by  public  plants   111,375 

JSTumber  of  lights  supplied  by  the  private  plants   288,000 

Average  capacity  in  h.p.  of  motors  supplied  by  public 

plants     1.106 

Capacity   in   h.p.    of   motors   supplied   by   the   private 

plants 6,650 

Average  number  of  k.w.h.   sold  by  public  plants   2,347,625 

Number  of  k.w.h.  sold  by  private  plants   11,684,000 

Average  price  per  k.w.h.  paid  by  customers  of  public 

plants     3.21  cents 

Average  price  per  k.w.h.  paid  by  customers  of  private 

plants     2.08  cents 

Thus  it  appears  that  in  Newcastle,  with  a  population  almost 
exactly  the  same  as  the  average  population  of  the  other  eight 
cities,  the  two  private  companies  have  nearly  three  times  as 
many  customers  as  the  average  number  of  customers  of  the 
public  plants ;  more  than  two  and  one-half  times  as  many  lights ; 
generate  more  than  six  times   as  much  power ;  and   sell  nearly 


172 


SELECTED    ARTICLES 


five  times  as  much  current  for  all  uses :  while  their  prices  aver- 
age more  than  2314  per  cent,  lower. 

These  results  have  been  accomplished  in  about  four  years  by" 
companies,  one  at  least  of  which  has  operated  under  legal  con- 
ditions more  nearly  like  those  governing  municipal  undertakings, 
than  any  others  in  England,  while  the  municipalities  with  which 
the  comparisons  are  made  have  had  a  free  hand  ever  since  1882 
to  accomplish  the  inferior  results  shown  by  their  operation. 

4.       FINANCIAL    RESULTS    UNSATISFACTORY. 

British  municipal  plants  of  the  kind  under  discussion,  as  a. 
whole,  show  an  average  loss.  Lord  Avebury,  formerly  Sir  John 
Lubbock,  the  second  chairman  of  the  London  County  Council, 
in  a  recent  communication  to  the  London  Standard  has  stated 
that  for  the  year  ending  March  31,  1903,  sixty  towns  and  cities, 
in  Great  Britain  showed  a  loss  in  operating  their  electrical  under- 
takings equivalent  to  nearly  half  a  million  dollars,  notwithstand- 
ing the  fact  that  "the  accounts  do  not  show  the  full  loss." 

Official  returns  for  the  electric-lighting  undertakings  of  the 
kingdom  to  December  31,  1904,  show  the  following  results  of 
operation  : 


Municipal 

Private 

Number  of  returns 

Undertakings  showing  profits 

Undertakings  showing  losses 

Total  amount  of  profits 

Total  amount  of  losses 

182 
105 

77 
£217,000 
83.000 

66 
61 

5 
£596,667 
5,000 

Balance  of  profits 

£134,000 
$770,000 

£591,667 

$2,958,335 

Percentage  of  plants  showing  profit 

Percentage  of  plants  showing  losses 

Average  profit  per  plant 

58    . 
42 
$4,230 

92 
8 
S45.126 

And  the  showings  made  by  municipal  plants,  as  poor  as  they 
are,  have  been  made  possible  only  by  neglect  of  the  items  of 
depreciation  and  reserve.     Says  Lord  Avebur\^ : 

In  comparatively  few  places  does  any  sufficient  sum  appear  to 
have  been  placed  to  depreciation  or  reserve  during  the  year  under 
review.  At  Glasgow  the  loss  was  transferred  to  a  suspense  ac- 
count, and  in  several  other  cases  the  loss  was  either  charged  to- 
the  general  district  or  borough  fund,  or  in  part  paid  by  this  means 
and  the  balance  carried  forward  to  next  year's  account. 


MUNICIPAL   OWNERSHIP  173 

Based  upon  Sir  Henry  Fowler's  "Returns"'  to  the  House  of 
Commons,  it  appears  that,  in  recent  years,  the  annual  allow- 
ances for  depreciation,  in  the  cases  of  193  water-works,  97  gas- 
works, 102  electric  plants,  and  29  tramways  owned  and  operated 
by  municipalities  in  England  and  Wales,  have  averaged  less 
than  two-tenths  of  i  per  cent,  on  the  amount  of  capital  origin- 
ally invested,  and  barely  over  two-tenths  of  i  per  cent,  on 
the  balance  of  capital  indebtedness  remaining  after  repayments 
of  capital  out  of  earnings. 

5.      MONOPOLY   OF   MUNICIPAL   CORPORATIONS. 

It  may  be  as  well  in  this  connection  as  in  any  other  to  say 
something  about  the  Association  of  Municipal  Corporations  and 
its  influence,  particularly  upon  legislation. 

According  to  a  recent  statement  by  its  president,  it  embraces 
in  its  membership  no  less  than  294  of  the  municipal  corporations 
of  the  country,  w'hich  is  w'ithin  about  thirty  of  the  whole  num- 
ber. Only  one  municipality  of  more  than  30,000  is  outside  its 
membership,  the  others  all  being  under  16,000.  Its  meetings 
are  largely  attended  by  the  mayors,  town  clerks,  and  other  prin- 
cipal officials,  as  well  as  by  the  members  of  the  town  and  borough 
councils.  Matters  of  common  interest  are  discussed,  and  the 
association  is  committed  for  or  against  the  various  matters 
touching  municipal  interests  proposed  or  pending  in  Parliament. 
It  employs  counsel,  and  otherwise  takes  an  active  part  in  shap- 
ing or  opposing  legislation.  As  practically  all  matters  of  im- 
portance, including  all  applications  for  rights  to  perform  quasi- 
public  services,  must  come  before  Parliament,  the  importance  of 
the  intervention  of  this  association  can  in  some  degree  be  appre- 
ciated. Its  power  is  tremendous — some  say  practically  invin- 
cible. 

6.      OFFICE-HOLDING  VOTERS. 

The  creation  of  a  large  and  ever-increasing  class  of  office- 
holding  voters  is  another  very  serious  result  of  municipal  owner- 
ship in  Great  Britain.  The  objections  to  it  are  obvious  to 
Americans  and  are  well  recognized  in  England. 

It  was  one  of  the  principal  features  of  the  meeting  of  the 
20th  of  July,  1905,  already  referred  to,  and  the  London  Times, 
in    its    editorial    upon    that    meeting,    not    only    emphasized    this 


174  SELECTED    ARTICLES 

danger,  but  pointed  out  the  fact  that  there  is  a  yearly  increase 
in  the  number  of  non-office-holding  persons  who  may  be  de- 
pended upon  to  vote  soHdly  for  municipal  extravagance  in  ex- 
penditure, being  what  the  Times  calls  "expectant  beneficiaries 
of  such  extravagance." 

Fully  to  realize  the  importance  of  this  consideration,  one  has 
but  to  reflect  upon  what  the  conditions  would  be  in  Boston,  New 
York,  Philadelphia,  or  any  other  large  American  city,  if  all  the 
street-car  operatives  and  electric,  gas-lighting,  and  telephone 
employees  were  added  to  the  already  sufficiently  large  municipal 
pay-rolls.  In  the  city  of  New  York,  for  example,  there  are 
about  50,000  such  employees,  exclusive  of  those  in  the  telephone 
service.  There  are  already  on  the  city  pay-rolls  fully  50,000 
municipal  employees.  If  the  former  should  be  added  to  the 
latter,  the  combined  force  would  constitute  an  army  of  fully 
100,000  people,  or  one-sixth  of  the  total  voting  population.  If 
united  and  aided  by  their  friends  and  relatives,  such  a  combina- 
tion would  be  invincible. 

Under  such  conditions,  the  existing  local  political  "machines" 
would  become  so  strong  as  to  be  impregnable,  and  the  private 
citizen  would  finally  realize  all  the  burdens  and  inconveniences 
which  his  practical  disfranchisement  would  involve.  He  is  now 
urged  to  take  some  part  in  local  politics ;  it  would  then  be  of  no 
use  to  do  so.  The  cohesive  power  of  such  a  combination  of 
office-holding  voters  would  control  every  local  matter,  particu- 
larly those  involving  expenditures  of  money  in  which  they  might 
have  a  personal  interest,  although  they  m.ight  not  be,  and  in  a 
majority  of  instances  would  not  be,  taxpayers  themselves. 

7.      INCREASE   IN    MUNICIPAL  DEBTS   AND  TAXES. 

The  last,  although  by  no  means  the  least  important,  circum- 
stance which  has  attended,  if  not  resulted  from,  the  enlargement 
of  municipal  functions  in  Great  Britain,  is  a  tremendous  increase 
in  municipal  indebtedness  and  taxes. 

Take,  for  example,  the  recent  statement  of  Lord  Stalbridge, 
chairman  of  the  London  &  Northwestern  Railway,  that  in  the 
twelve  years  between  1891  and  1003  the  local  rates  and  taxes, 
exclusive  of  income  tax  or  government  duties,  paid  by  British 
railways   increased  from   the   equivalent   of  about  eleven  and   a 


MUNICIPAL   OWNERSHIP  175 

quarter  million  dollars  to  nearly  twenty-two  and  a  half  million 
dollars,  or  100  per  cent,  and  continues  to  increase  at  the  rate  of 
a  million  and  a  quarter  yearly. 

One  of  the  leading  citizens  and  most  extensive  manufacturers 
of  Glasgow,  and  at  the  same  time  one  of  the  fairest  men  ii:  his 
attitude  toward  municipal  ownership,  ]\Ir.  Arthur  Kay,  in  a 
paper  read  before  the  Glasgow  Royal  Philosophical  Society, 
March  25,  1903,  reviewing  the  local  statistics  for  the  preceding 
eleven    years    said : 

The  figures  given  show  that  the  population  of  Glasgow  has  in 
the  past  eleven  years  increased  16  per  cent.,  the  valuation  45  per 
cent.,  the  rates  [i.  e.,  local  taxes]  112  per  cent.,  and  the  debt  119 
per  cent.  The  ratio  of  assets  to  liabilities  has  gone  up  from  119. 0& 
to  128.89. 

That  is  to  say :  the  valuations  of  property  for  taxation  had 
increased  nearly  three  times  as  much  as  the  population ;  which, 
of  course,  involves  the  possibility  that  the  increase  in  the  actual 
wealth  of  the  community  had  enormously  outstripped  the  in- 
crease of  the  population  in  eleven  years,  but  more  probably  leads 
to  the  conclusion  that,  in  order  to  meet  the  demands  of  a  rapidly 
increasing  municipal  expenditure,  the  valuations  of  property  for 
purposes  of  taxation  had  been  abnormally  advanced ;  also  that 
the  individual  ratepayer  had  seen  his  annual  taxes  more  than 
doubled  in  the  period,  and  the  municipal  indebtedness  for  which, 
as  a  citizen,  he  is  in  part  responsible,  increased  in  a  still  larger 
ratio,  while  the  excess  of  the  municipal  assets  over  liabilities 
had  increased  only  by  a  paltry  10  per  cent. 

///.     Causes  of   Unfavorable  Results. 

Assuming  the  foregoing  to  be  a  fair  statement,  in  outline,  of 
the  present  condition  of  municipal  electric  lighting,  railroading, 
and  telephoning  in  Great  Britain,  and  that,  upon  the  whole,  it 
would  not  be  desirable,  if  practicable,  to  reproduce  them  in  the 
United  States,  and  that  it  is  wise,  if  possible,  to  avoid  the  causes 
by  which  they  have  been  produced,  it  is  necessary  to  determine 
those  causes  with  as  much  accuracy  as  may  be. 

The  principal  and  controlling  cause  of  the  results  which  have 
been  obtained  in  Great  Britain  is  found  in  English  legislation 
and  official  regulation  respecting  the  electric  industry. 


176  SELECTED    ARTICLES 

Municipal  ozvnership  of  gas-works. — xA-nother  cause  of  the 
unsatisfactory  results  above  indicated  is  the  municipal  owner- 
ship of  existing  gas-works.  This  fact  has  led  the  municipalities 
owning  them,  with  practical  uniformity,  to  object  to  the  ex- 
ploitation of  a  new  illuminant  by  private  capital,  and  to  pro- 
cure rights  for  themselves,  which  have  been  in  fact,  if  not  in 
law,  exclusive.  Under  these  rights  they  have  either  not  estab- 
lished electric-lighting  plants  at  all,  or  have  established  them 
after  Img  periods  of  delay,  thus  depriving  the  communities 
which  they  have  represented  of  the  new  and  improved  illuminant, 
either  permanently  or  for  long  periods  of  time  after  the  progres- 
sive communities  of  the  United  States  had  been  supplied  by 
private  companies. 

Municipal  inertia. — Another  cause  is  lack  of  that  individual 
initiative  and  business  energy  and  push,  without  which  no  indus- 
try will  develop. 

In  municipal  management  it  often  happens  that  the  right 
thing  at  the  right  moment  cannot  be  done  for  lack  of  power. 
Consent  must  be  gotten  from  the  local  authorities ;  and  before 
it  comes,  the  opportunity  is  gone.  At  one  time  a  popular  revul- 
sion against  extravagance  results  in  failure  to  make  proper 
necessary  expenditures,  and  at  another  a  determination  to  have 
good  service  leads  to  waste  or  recklessness.  Public  business  is 
everybody's  business.  Everybody's  business  is  nobody's  business, 
and  things  a  little  out  of  the  routine,  the  little  unexpected  all- 
important  things  which  constantly  appear,  are  found  undone 
under  municipal  management  when  it  is  too  late  to  do  them. 
Private  business  has  the  enterprise  and  energy  which  municipal 
business  lacks. 

Xone  of  these  causes  have  been  operative  in  the  United 
States,  and,  because  of  their  absence,  the  industry  has  been  vastly 
better  developed,  and  the  extent  of  territory  and  the  number 
of  persons  served  have  been  much  larger. 

/F.     Duplication    of  British  Results,  so  Far  as  Favorable,  Im- 
possible in  America. 

But  if  it  should  be  assumed  that  the  results  of  municipal 
undertakings  in  Great  Britain  are,  upon  the  whole,  favorable  to 


MUNICIPAL   OWNERSHIP  177 

the  consumer  and  the  public  at  large,  and  that  it  would  be  desira- 
ble, if  practicable,  to  duplicate  them  in  the  United  States,  this 
could  not  be  done,  owing  to  the  existence  of  radically  different 
conditions  in  the  two  countries. 

Differences  in  political  conditions. — If,  and  so  far  as,  the 
municipal  ownership  and  operation  of  public-service  utilities 
in  Great  Britain  have  been  successful,  it  has  been  because  of  the 
character  of  the  local  civil  service  of  that  country.  Politics,  in 
the  American  sense,  is  unknown  in  the  administration  of  local 
enterprises.  Business  principles  are  applied  to  the  administra- 
tion of  public  as  well  as  private  works.  The  rigid  limitation  of 
the  voting  franchise,  with  other  causes,  has  operated  to  put  into 
city  and  town  councils  and  other  local  legislative  bodies  men 
of  a  superior  type,  who  regard  public  service  as  an  honor,  and 
whose  services  are  retained  by  the  public  practically  as  long  as 
they  are  willing  to  serve.  In  the  choice  of  administrative 
officials  they  exercise  the  same  care  as  the  directors  of  private 
corporations  do,  and  the  tenure  of  such  officials  is  as  long  and 
as  certain  as  that  of  those  in  similar  capacities  in  private  em- 
ployment. 

Laivs  governing  the  voting  franchise. — The  qualified  voters 
for  municipal  officials  are  called  '"burgesses."  They  are  persons 
of  full  age,  w^ho.  for  at  least  one  year,  have  occupied  alone,  or 
with  others,  a  house,  shop,  or  other  building  in  the  borough, 
and  have  resided  in  the  borough  or  within  seven  miles  thereof 
for  a  full  twelve  months. 

The  most  important  limitation  of  this  general  qualification 
of  the  burgess  is  that  he  must  have  paid,  on  or  before  July  20, 
all  rates,  (i.  e..  local  taxes)  which  were  payable  by  him  up  to 
the  preceding  January  5.  In  Scotland  this  provision  operates 
very  much  to  reduce  the  actual  voting  lists  below  the  number 
who  are  theoretically  entitled  to  enrollment.  It  practically  ex- 
cludes from  the  franchise  the  entire  body  of  irresponsible  and 
vicious  electors.  Albert  Shaw,  in  his  Municipal  Government  in 
England,  1895.  estimates  that  these  provisions  exclude  at  least 
one-third  of  the  theoretical  voters  at  all  parliamentary  and  mu- 
nicipal  elections   in    Scotland. 

The  "lodger,"  so  called — that  is,  an   unmarried  man.  paying 


178  SELECTED    ARTICLES 

at  least  $50  a  year  for  lodgings — is  theoretically  entitled  to 
the  franchise ;  but  inasmuch  as  he  must  procure  his  own  enroll- 
ment from  year  to  year  (whereas  the  ordinary  ratepayer  is 
enrolled  without  any  action  on  his  part,  because  he  is  a  rate- 
payer), he  practically  loses  his  right  to  vote.  Thus  it  is  appar- 
ent that  all  "floaters"'  and  other  irresponsible  unattached  single 
men  are  excluded  from  the  franchise.  Out  of  20,000  Jews  hud- 
dled together  in  the  tenements  of  the  Cheetham  districts  of  Man- 
chester only  900  are  on  the  municipal  voting  registers — undoubt- 
edly chiefly  because  they  do  not  meet  the  requirement  as  to 
the  rentable  value  cf  the  tenements  occupied  by  them.  But 
this  law  sometimes  excludes  intelHgent  citizens  from  the  fran- 
chise, simply  because  they  are  "lodgers,"  as,  for  example,  in 
the  case  of  the  ten  reporters  on  the  Manchester  Evening  Chron- 
icle, not  one  of  whom  was  a  voter  at  local  elections.  In  England 
the  lodger  is  excluded  by  law  from  the  municipal  franchise,. 
although  he  may  vote  for  members  of  Parliament, — except  in 
London,  where  a  lodger  in  occupation  and  residence  in  one  defi- 
nite house  within  the  borough  for  the  preceding  twelve  months 
is  allowed  to  vote. 

The  exploitation  of  the  slums  and  of  the  non-rent-paying 
population  for  municipal  political  purposes  is  therefore  practi- 
cally impossible  in  Great  Britain. 

In  addition  to  the  provisions  for  the  practical  limitation  of 
the  electoral  franchise  to  the  responsible  and  desirable  rate- 
payers, the  purity  and  efficiency  of  municipal  government  in 
Great  Britain  has  also  been  protected  and  promoted  by  the  great 
stringency  of  the  so-called  Corrupt  Practices  Acts,  applicable 
throughout  the  kingdom. 

Evidences  of  deterioration  in  local  governments. — But,  ex- 
cellent as  is  their  general  character,  I  think  it  is  beginning  to 
be  understood  and  generally  admitted  that  the  local  governing 
boards  of  the  larger  British  towns  and  cities  are  becoming  less, 
rather  than  more,  efficient.  This  result  naturally  accompanies 
the  multiplication  of  the  duties  imposed  upon  those  bodies.  They 
are  becoming  overburdened,  and  in  some  cases  fairl}'^  swamped, 
with  the  extent  and  variety  of  the  public  concerns  which  engage 
their  attention.  In  Glasgow,  for  example,  it  is  said  that  a  con- 
scientious member  of  the  council  must  devote  about  two  days  a 
week  to  the  discharge  of  his  public  duties.     In  Manchester  the 


MUNICIPAL   OWNERSHIP  179 

chairman  of  the  gas  committee  for  ten  years  has  spent  at  least 
six  hours  a  day  in  the  discharge  of  the  duties  of  that  position. 
While  willing  to  give  much  of  their  time  gratis  to  the  public 
service,  business  men  are  beginning  to  find  that  the  draft  upon 
it  is  more  than  they  can  meet  without  absolute  disregard  of  their 
private  affairs.  '  The  wonder  is,  that,  notwithstanding  this  fact, 
these  bodies  have  thus  far  adhered  as  closely  as  they  have  to  the 
high   standards  of  the  past. 

V.    Summary. 

First.  The  operation  by  British  municipalities  of  public 
utilities  of  the  kind  under  consideration  has  been  successful, 
if  at  all,  in  the  single  particular  of  furnishing  the  service  or 
supply  at  a  fair  price  to  a  comparatively  few  persons.  Aside 
from  gas  supply,  it  has  not  resulted  in  any  considerable  profit 
to  the  municipalities,  the  losses  in  electric  lighting,  traction,  and 
telephone  enterprises  being  frequent,  while  the  profits  when 
realized  are  generally  not  more  than  2  or  3  per  cent,  on  the 
investment — the  net  result  to  date  being  an  average  loss. 

Second.  It  is  by  no  means  conceded,  but,  on  the  other  hand, 
is  strenuously  denied,  even  in  England,  that  municipal  trading 
has,  upon  the  whole,  been  successful,  and  British  public  senti- 
ment is  by  no  means  settled  upon  that  subject. 

Third.  The  municipal  supply  of  electricity  for  light,  trac- 
tion, and  telephone  service  has  been  attended  by  certain  serious 
results,  which  more  than  offset  the  success,  if  any,  which  has 
been  obtained  in  the  single  resppect  above  referred  to,  viz : 

(i)  A  most  serious  check  upon  the  general  development 
of  the  electrical  industry  in  Great  Britain,  and,  in  consequence, 
upon  the  establishment  of  the  manufacturing  plants  and  facili- 
ties which  would  otherwise  have  grown  up. 

(2)  An  extremely  restricted  supply  in  the  cases  where  the 
supply  has  been  undertaken,  resulting  in  the  accommodation  of 
the  few,  to-  wit,  consumers,  at  the  expense  of  the  many,  to  wit, 
rate-paying   non-consumers. 

(3)  The  abnormal  enlargement  of  the  functions  of  local 
government,  resulting  in  the  discouragement  of  private  enter- 
prise, and  the  creation  of  a  large  and  increasing  body  of  office- 
holding  voters. 


i8o  SELECTED    ARTICLES 

(4)  A  most  serious  enlargement  of  municipal  indebtedness, 
and  the  creation  of  a  class  of  voters  who  can  be  relied  upon  to 
support  extravagant  expenditures. 

Fourth.  The  unfavorable  results  realized  in  the  development 
of  the  electric  industry  are  primarily  traceable  to  the  character 
of  the  legislation  and  official  regulations  governing  the  matter, 
all  of  which,  professedly  and  in  reality,  are  framed  for  the  en- 
couragement of  municipal,  and  the  discouragement  of  private, 
enterprise;  and  also  to  the  inertia  and  lack  of  business  enterprise 
which  are  inseparable  from  municipal  operation. 

These  laws  and  regulations,  not  having  worked  well  in 
Great  Britain,  should  not  be  imitated  or  approximated  in  America. 

Fifth.  If  a  different  view  from  that  above  expressed  is  taken 
of  the  character  of  the  results  achieved,  and  it  is  deemed  advisa- 
ble, if  practicable,  to  duplicate  the  financial  and  technical  results 
of  British  municipal  undertakings  in  America,  it  will  be  im- 
possible to  do  so,  owing  to  the  totally  different  political  condi- 
tions obtaining  in  the  municipalities  of  the  two  countries,  re- 
spectively. Not  only  is  the  municipal  civil  service  in  Great  Brit- 
ain totally  different  from  that  in  America,  and  dependent  for  its 
character  and  tenure  upon  a  wholly  different  system  of  laws 
and  administration,  but  the  public  sentiment  and  education  of 
the  people  of  the  two  countries  upon  the  subject  is  so  opposed 
that  the  conditions  in  either  country  could  not  be  reproduced, 
by  legislation,  or  otherwise,  in  the  other. 

Sixth.  In  view  of  all  the  foregoing  considerations,  it  is  mani- 
fest that  the  continued  encouragement  of  the  exploitation  of 
private  business  by  private  capital,  rather  than  the  entrusting 
of  business  or  quasi-business  enterprises  to  municipal  officials, 
is  the  only  sound  course  to  be  pursued  in  the  United  States. 

American  Journal  of  Sociology.  12:  328-40.  November,  1906. 

Public   Ownership  and   Popular  Government. 

William  Horace  Brown. 

The  growing  sentiment  in  favor  of  public  ownership  and  op- 
eration of  industrial  enterprises  appears  to  be  due  mainly  to  two 


MUNICIPAL   OWNERSHIP  i8i 

causes :  first,  dissatisfaction  with  the  manner  in  which  such 
enterprises,  or  those  of  them  conducted  under  pubHc  franchises 
or  privileges,  are  operated  under  private  ownership ;  second,  re- 
sentiment  against  large  aggregations  of  private  capital,  whether 
its  employment  in  such  enterprises  is  advantageous  to  the  public 
or  not. 

The  first  cause  appears  to  predominate  in  American  munici- 
palities. The  second  is  no  doubt  the  moving  sentiment  of  the 
majority  of  those  in  the  United  States  who  would  have  the  fed- 
eral government  own  and  operate  the  railways  and  telegraphs, 
although  other  reasons  are  commonly  assigned. 

The  term  "industrial  enterprises"  is  used  in  the  broadest 
sense,  with  a  knowledge  of  the  distinction  observed  in  the  secur- 
ities market  between  manufacturing  and  mercantile  business 
commonly  termed  industrial,  and  the  transportation,  lighting, 
and  other  business  usually  carried  on  under  public  franchises. 
Yet  as  a  fact  all  are  industries — departments  of  business  employ- 
ing capital  and  labor.  The  separation  of  those  departments  of 
enterprise,  or  business,  which  are  commonly  conducted  under 
public  franchises  or  subject  to  public  regulation  in  certain  re- 
spects, from  other  departments  as  properly  and  naturally  those 
which  should  be  owned  and  operated  by  government,  either  mu- 
nicipal or  federal,  is  purely  arbitrary.  When  it  is  asserted  by 
advocates  of  public  ownership  and  operation  that  there  is  such 
a  distinction  which  they  desire  government  to  observe,  they  at 
once  admit  the  doubtfulness  of  their  proposition,  and  the  neces- 
sity of  placing  close  bounds  upon  their  innovation.  In  European 
countries  no  such  distinction  is  insisted  on.  Municipalities  there 
own  abattoirs  and  distilleries,  and  engage  in  many  other  enter- 
prises. Therefore,  if  it  is  a  proper  function  of  government,  mu- 
nicipal, state,  or  federal,  to  engage  in  the  railroad  or  gas-mak- 
ing business,  it  is  likewise  proper  for  it  to  go  into  many  other 
kinds  of  business. 

The  municipality  exercises  control  over  and  grants  special 
privileges  in  greater  or  less  degree  to  the  omnibus  carrying  busi- 
ness, house-wrecking,  the  building  business,  the  advertising-sign 
business,  not  to  quote  too  long  a  list.  It  does  not  seem  to  be  any 
stretch  of  logic  to  analogize  that,  if  a  municipality  may  proper- 


l82 


SELECTED    ARTICLES 


ly  engage  in  the  telephone  business,  because  it  permits  the  string- 
ing of  wires  in  alleys  and  under  the  streets,  it  may  as  properly 
engage  in  the  construction  business,  on  the  ground  that  in  the 
erecting  of  buildings  contractors  are  specially  permitted  to  mo- 
nopolize half  the  street  about  the  premises  during  such  opera- 
tions. Besides,  building  is  under  strict  municipal  regulation  as 
to  materials  used,  sanitary  appliances,  etc.,  and  is  controlled  by 
the  city  inspectors. 

If  we  are  to  admit  it  to  be  the  logical  function  of  government 
to  turn  merchant,  manufacturer,  and  speculator,  with  the  money 
of  the  taxpayers,  it  is  of  first  importance  to  find  out  whether 
we  are  to  place  any  limitations  upon  it,  and,  if  we  are,  for  what 
reason.  If  we  are  going  to  fix  an  arbitrary  rule  of  limitation, 
without  sound  reasons  therefor,  we  may  as  well  expect  those  who 
follow  after  us  to  throw  it  over,  So  it  would  seem  to  be  of  first 
importance  to  ascertain  and  bear  in  mind  what  the  province  of 
the  government  under  free  institutions  really  is.  Under  an  ab- 
solutism the  problem  is  exceedingly  simple.  The  nearer  we  ar- 
rive at  popular  freedom,  the  more  disputed  it  becomes. 

It  is  undeniable  that  in  the  United  States  from  the  earliest 
times  the  people  have  been  firm  in  the  faith  that  government 
was  for  the  purpose  of  conducting  purely  public  business,  and 
should  interfere  as  little  as  possible  with  the  occupations  of  the 
citizens.  In  early  years  this  feeling  was  so  strong  that  it  threat- 
ened disruption  of  the  government  as  organized  under  the  fed- 
eral constitution.  People  denied  its  authority  to  declare  embar- 
goes or  to  impose  internal  revenue  taxes.  The  whole  body  of 
the  people  wanted  the  least  government  necessary  to  preserve 
order  locally  and  to  conduct  interstate  and  foreign  affairs,  and 
they  wanted  that  at  the  least  possible  cost.  This  was  the  senti- 
ment which  Mr.  Jefferson  coined  into  his  epigram:  "That  gov- 
ernment is  best  which  governs  least." 

The  theory  was,  of  course,  that  the  people  should  be  permit- 
ted the  widest  latitude  in  conducting  their  commerce  and  in 
regulating  their  private  actions  not  inconsisent  with  the  gen- 
eral welfare.  There  should  be  no  sumptuary  laws  ;  no  state  inter- 
ference with  religion:  no  laws  permitting  monopolies;  no  fa- 
voritism ;  no  recognition  of  class   distinctions ;  nothing,  in   fact. 


MUNICIPAL   OWNERSHIP  183 

that  would  in  any  way  deny  perfect  equality  or  interfere  with 
the  exercise  of  commercial  and  individual  liberty;  always,  of 
course,  recognizing  the  universal  code  of  morality.  In  general, 
this  has  been  admitted  by  every  writer  of  recognized  authority 
on  governmental  science  as  the  true  basis  of  popular  representa- 
tive government,  both  in  England  and  in  America.  From 
Franklin  and  Jefferson  and  ^Madison,  to  Bryce  and  Lecky,  it 
will  be  found  as  a  recognized  principle,  even  among  those  writ- 
ers who  hold  less  faith  in  democracy  than  others.  It  is  simply 
a  recognition  that  the  day  for  anything  like  a  paternal  govern- 
ment for  an  intelligent  people  is  past. 

A  real  democracy  is  adapted  only  to  simple  forms  of  gov- 
ernment; for  government,  being  an  institution  of  business,  can- 
not be  successfully  conducted  through  many  ramifications  by 
the  popular  will.  The  popular  understanding  is  not  equal  to 
coping  with  intricate  business  propositions.  The  more  compli- 
cated the  government  of  a  municipality  becomes,  the  greater 
the  number  of  departments;  and  the  more  responsibilities  in- 
volved, the  less  is  success  likely  to  attend  management  by 
boards  of  unskilled  minds  subject  to  popular  influence  or  guided 
by  partisan  interests.  The  more  and  weightier  the  business  under- 
taken, the  greater  the  requirement  for  centralized  authority  and 
specialized  skill;  and  consequently  the  less  can  be  permitted  of 
popular  dictation.  This  is  merely  the  principle  that  applies  to 
business  consolidation,  where  the  most  intricate  problems  are 
concentrated  in  a  few  executive  heads. 

How  can  we  square  this  sentiment,  this  fundamental  principle 
of  a  minimum  of  governmental  interference,  with  the  theory 
that  the  people,  either  individually  or  organized  together  in 
companies,  are  not  to  be  intrusted  with  the  conduct  of  commer- 
cial enterprises,  and  that  government  shall  deprive  the  people  of 
their  business  opportunities,  and  monopolize  such  enterprises 
under  its  arbitary  power?  The  question  cannot  be  answered  by 
any  shifting  rules  of  limitation — that  has  already  been  shown. 
Under  the  assumption  that  all  commerce  or  enterprise  carried 
on  under  a  public  franchise  or  privilege  is  proper  business  for 
government  to  engage  in,  the  principal  departments  of  com- 
mercial enterprise  would  be  included.  It  is  merely  a  question  of 


i84  SELECTED    ARTICLES 

degree,  at  the  most;  and  it  matters  little  as  to  the  difference 
between  packing-houses  operating  under  municipal  license,  and 
under  guard  of  municipal  and  government  inspectors,  and  an 
electric  company  with  a  franchise.  It  resolves  itself  at  once  into 
a  question  of  whether,  if  government  is  more  competent  and 
better  entitled  to  conduct  one-fourth  of  the  business  of  the 
country — that  is,  to  deprive  the  people  of  one-fourth  of  their 
worldly  opportunities — it  should  not  take  over  and  conduct  one- 
half,  or  three-fourths,  or  all,  and  leave  the  people  with  no 
opportunities  whatever.  Otherwise  stated,  if  it  is  the  proper 
function  of  government  to  take  from  the  people  and  operate  a 
part  of  the  business  enterprises  within  its  jurisdiction,  it  is  not 
the  proper  function  of  the  people  to  say  it  may  not  also  assume 
and  monopolize  other  enterprises. 

To  be  sure,  municipal-ownership  advocates  will  declare  that 
it  is  not  proposed  to  deprive  the  people  of  anything;  that,  on 
the  contrary,  it  is  proposed  to  take  from  the  corporations  that 
have  robbed  the  public  and  give  to  the  people  that  which  right- 
fully belongs  to  them.  This  has  a  very  seductive  sound,  but  it  is. 
sophistry.  The  people  own  the  businesses  which  it  is  proposed 
government  shall  take  over  and  conduct.  There  are  perhaps 
several  millions  of  shareholders  in  the  various  corporations  of 
the  United  States.  In  addition,  the  saving  banks  hold  over  three 
billion  dollars  of  deposits,  the  life-insurance  companies  have 
nearly  as  much,  a  very  large  percentage  of  all  being  invested  in 
corporate  securities,  really  held  with  the  people's  money.  It 
is  intended  to  pay  them  for  their  properties,  of  course.  But  has 
government  the  money  to  do  this?  No,  it  intends  either  to  bor- 
row the  money  on  the  properties  or  to  go  in  debt  to  the  owners, 
for  them.  Now  we  have  arrived  at  this  situation:  The  people 
who  are  actually  in  the  business  which  the  government,  local  or 
federal,  will  take  over,  must  retire  from  such  business.  They 
must  enter  other  business,  become  idle  capitalists  living  on  their 
incomes,  or  seek  salaried  positions.  They  cannot  enter  other 
lines  of  trade  without  displacing  some  who  are  already  in  them, 
for  practically  all  avenues  of  trade  are  as  full  as  reasonable 
profits  will  permit ;  otherwise  there  would  be  an  increase  of 
competition  as  things  now  are.   The  municipalization  or  govern- 


MUNICIPAL   OWNERSHIP  185 

ment  ownership  of  industries  will  not  create  new  business.  It  will, 
in  fact,  tend  to  narrow  the  volume  of  exchanges,  for  the  reason 
that,  on  the  average,  public  operation  will  not  be  as  en- 
terprising or  as  ably  conducted  as  private  operation.  This  will 
be  disputed,  but  it  appeals  to  reason  that  the  citizens  who  have 
created  the  country's  industries,  who  are  conversant  throughout 
with  their  technicalities,  and  who  now  successfully  manage  them, 
are  more  competent  to  do  so  than  any  others  are.  The  people 
who  have  shown  the  greatest  ability  in  building  up  businesses 
are  surely  the  ablest  in  managing  them. 

The  government,  after  thus  having  displaced  the  most  com- 
petent business  skill  of  the  land,  greatly  disturbing  the  equilib- 
rium of  trade  in  so  doing,  and  destroying  the  choicest  avenues  of 
money-making  investments,  holds  out  to  the  people  thus  dis- 
possessed the  alternative  of  accepting  its  low-rate  bonds  for  the 
amoimt  of  their  holdings — for  we  are  not  considering  now  the 
radical  scheme  of  confiscation.  Thus  all,  so  far,  except  wage- 
earners,  have  had  their  incomes  reduced,  their  possibilities  for 
advancement  curtailed,  with  large  numbers  forced  into  idleness ; 
while  the  overcrowding  of  other  business  channels  and  lines  of 
endeavor  have  reduced  profits  and  caused  business  demoraliza- 
tion. Government,  meanwhile,  has  become  shopkeeper,  trader^ 
speculator,  carrier,  exclusively  with  hired  help,  much  of  which  is 
engaged  because  of  political  influence  or  partisan  activity.  It  has 
promised  higher  wages,  and  is  attempting  to  pay  them  with 
impaired  efficiency  in  operation  and  against  a  condition  of  indus- 
trial disturbance.  At  the  same  time,  its  income  from  taxes  has 
fallen  greatly,  not  because  the  rate  of  taxes  is  less — it  is.  in  fact, 
higher — but  because  all  the  property  which  it  has  taken  over  now 
pays  no  taxes,  and  the  bonds  with  which  it  paid  for  them  are,  as  a 
rule,  not  productive  of  taxes. 

Something  must  be  done  to  forefend  disaster.  An  attempt 
is  made  to  reduce  wages,  which  have  been  in  many  instances 
raised  through  influences  other  than  consideration  for  the  best 
interests  of  the  enterprises ;  and  strikes  and  tumults  follow. 
Whatever  deficiencies  occur  in  returns  must  be  made  up  from 
the  general  fund.  New  taxes  are  imposed — stamp  taxes,  increases 
in  the  excise,  a  modification  of  the  tariff — which   of  course  al- 


i86  SELECTED    ARTICLES 

ways  means  a  raise.  And  then  a  revulsion  of  feeling  in  regard  to 
government  trading. 

Now,  it  is  just  as  easy  to  deny  that  these  results  would  occur 
under  an  extensive  experiment  in  public  ownership  and  operation 
as  it  is  to  outline  them  as  probable.  No  government  has  entered 
upon  the  scheme  far  enough,  and  tried  it  long  enough,  to 
establish  a  criterion  which  may  be  used  as  indisputable  evidence. 
Lacking  sufficient  statistics  of  actual  results  necessarily  leaves 
the  subiect  in  a  degree  open  to  conjecture;  but  only  as  any 
proposition  in  conflict  with  logic  and  the  known  results  of 
human  actions  are  conjectural.  And  we  have  incomplete  data 
which  show  the  trend  of  municipalization  experiments  in  the 
direction  indicated. 

It  is  more  than  inconsistent,  it  is  paradoxical,  for  a  people 
who  have  for  generations  maintained  the  doctrine  of  the  widest 
possible  freedom  in  all  departments  of  human  endeavor,  and 
particularly  for  that  portion  of  the  people  which  has  supported 
that  doctrine  to  extremes,  now  to  appear  as  the  sponsor  for  a 
system  of  governmental  interference  with  such  freedom  so 
radical  that  it  is  nothing  short  of  paternalism.  This  strange 
paradox  is  not  relieved  by  the  excuse  that  the  common  people 
are  being  despoiled  by  defiant  corporations  which  enjoy  and 
abuse  special  public  privileges.  The  corporations  are  a  part  of 
the  people.  They  are  creatures  of  the  same  governmental  power 
which  it  is  proposed  shall  supersede  them  in  proprietorship, 
and  are  supposed  to  be  subject  to  the  control  of  that  power. 

If  government  has  created  institutions  that  are  harmful  to 
the  country  and  the  people,  it  is  a  governmental  fault.  The 
people  created  the  government  and  maintain  it.  They  elect,  by 
universal  suffrage,  the  officials  who  administer  the  afifairs  of  the 
government.  If  these  affairs  are  inefficiently  or  dishonestly  ad- 
ministered, it  reflects  directly  upon  the  intelligence  and  the 
watchfulness  of  the  electors.  Administrators  as  well  as  legislators 
hold  their  offices  by  short  tenures.  It  is  the  business  of  the 
people — not  their  privilege,  but  their  business — to  keep  their 
government  in  clean  and  able  hands.  Just  so  far  as  they  do  this 
do  they  demonstrate  their  fitness  for  self-government.  Just  so 
far  as  they  fail  or  neglect  to  do  this  do  they  show  their  unfit- 


MUNICIPAL   OWNERSHIP  187 

ness.  Under  our  system  bad  government  must  be  the  result  of 
the  incapacity  or  indifiference — which  is  the  most  hopeless  kind 
of  incapacity — of  the  citizens. 

This  is  so  manifest  as  to  be  not  debatable;  yet  we  know 
government  has  created  corporations  that  have  imposed  on  the 
public,  and  that  it  has  failed  to  exercise  adequate  control  over 
them.  States  have  shown  unwise  liberality  in  granting  charter 
powers  without  adequate  safeguards,  and  American  municipali- 
ties are  notorious,  n(5t  only  for  their  prodigality  in  granting 
franchises,  but  in  the  worse  than  incompetent  manner  in  which 
they  manage  their  business  affairs  generally.  It  is  a  frequent 
comment  that  our  governmental  system  has  shown  its  weakness 
more  in  the  government  of  large  cities  than  in  any  other  respect. 
Demagoguism,  graft,  and  political  trickery  find  in  them  their 
most  profitable  fields,  and  it  is  in  them  that  reform  works  the 
slowest. 

Even  where  rank  dishonesty  does  not  appear  in  the  conduct 
of  municipal  business,  there  has  been  much  to  condemn.  We  can 
see  on  every  hand  in  practically  all  of  our  cities  things  that 
have  been  done  wrong  or  entirely  neglected.  Cities  have  grown 
with  great  strides,  problems  have  developed  rapidly,  and  our 
system  of  rotation  in  office,  to  forestall  building  up  an  office- 
holding  class,  has  had  the  effect  of  keeping,  too  much  of  the 
time,  inexperienced  men  in  the  management  of  them.  In  some 
instances,  also,  there  have  been  inadequate  systems  imposed  by 
state  constitutions  or  legislatures.  But  in  all  cases  the  shortcom- 
ings are  primarily  those  of  the  people.  Franchises  have  been 
corruptly  bartered  by  councils  and  boards;  yet  we  know  that 
members  who  have  been  notorious  in  such  treachery  to  the  pub- 
lic's interests  have  been  returned  again  and  again  to  their  ofiices 
by  the  votes  of  the  people.  It  is  hardly  an  exaggeration  to  say 
that  the  officials  who  have  been  most  recreant  to  their  trust  have, 
as  a  rule,  been  able,  through  their  machinations,  to  hold  their 
places  for  the  longest  periods.  Whenever  municipal  ownership 
abroad  is  cited,  it  should  be  remembered  that  in  European  cities, 
as  a  rule,  the  executive  officers  are  not  elected  by  the  people,  and 
are  free  from  political  press^e.  This  is  true  even  of  the  chief 
cities  of  England  and  France. 


i88  SELECTED    ARTICLES 

Many  other  facts  of  common  knowledge  might  be  quoted  to 
expose  the  errors  of  government  and  its  defects  in  business 
management.  The  real  difficulties  have  been  great.  Legislative 
bodies  and  executives  have  lacked  foresight  in  providing  for 
adequate  control  over  public  corporations.  Entanglements  and 
litigation  have  resulted  in  many  instances ;  and  if  we  freely  allow 
that  corporate  greed  has  overstepped  itself  and  brought  on  a 
storm  of  popular  resentment,  it  must  be  remembered  that  in  few 
instance-^  has  public  management — that  is,  the  officials  of  all 
classes — been  competent  successfully  to  cope  with  it.  And,  in 
the  final  summing-up,  it  will  be  found  that  two  causes  are  at  the 
bottom  of  the  whole  trouble :  our  political  system,  which  insists 
on  short  tenures  of  office  and  selects  public  servants  for  other 
reasons  than  their  superior  ability;  and  the  carelessness  or  lack 
of  judgment  of  the  people  themselves. 

There  is  to  be  taken  account  of  the  arguments  that  the  task 
of  government  in  properly  controlling  public  utility,  or  other 
commercial  enterprises  operating  under  public  privileges,  is 
greater  than  it  would  be  in  conducting  those  enterprises  itself; 
and  that  the  removal  of  such  businesses  from  private  hands  tO' 
government  proprietorship  would  at  the  same  time  remove  the 
principal  source  of  political  corruption. 

The  former  contention  is  a  necessary  one  for  the  advocates 
of  government  trading,  for  at  the  outset  they  are  met  with  the 
indisputable  facts  given  above  concerning  the  weakness,  even  tO' 
failure,  in  the  conduct  of  purely  official  business.  The  very  first 
step  in  the  logic  of  the  case  is  that,  if  our  officials,  as  they  aver- 
age, have  failed  in  the  conduct  of  afYairs  purely  public  in  their 
nature,  they  would  fail  yet  worse  in  conducting  the  largest  busi- 
ness enterprises  of  the  country  added  thereto  in  one  vast  compli- 
cation. If  they  have  been  found  wanting  in  some  things,  there 
is  not  the  slightest  warrant  founded  on  human  experience  for 
the  belief  that  they  would  prove  more  efficient  in  many  and 
weightier  things.  Such  an  assumption  is  not  only  contrary  to 
experience,  but  is  repugnant  to  common-sense.  It  does  not 
matter  that  municipalities  are  operating  some  public-service 
plants  with  a  degree  of  success.  They  might  conduct  them  with 
a  still  greater  degree  of  success  without  afTecting  the  argument.. 


MUNICIPAL   OWNERSHIP  185^ 

As  to  the  second  claim,  while  it  might  prove  true  in  some 
instances,  there  are  records  that  show  it  cannot  be  depended  on. 
Human  nature  is  not  changed  by  merely  shifting  the  temptation. 
Years  ago  Philadelphia  owned  and  operated  her  gas-works.  On 
the  theory  of  municipalization  advocates,  that  should  have  pre- 
vented tampering  with  the  officials,  so  far  as  the  gas  business  was 
concerned,  and  the  business  should  have  been  a  blessing  to  the 
people.  But  the  results  were  contrary.  The  works  were  allowed 
to  run  down,  the  quality  of  the  product  was  low,  the  price  for  it 
high.  All  this  was  laid  to  the  machinations  of  capitalists  who 
were  alleged  to  have  bribed  and  conspired  with  the  officials, 
where  the  capitalists  themselves  were  not  the  officials.  Finally 
a  change  was  made.  The  works  and  business  were  turned  over 
to  a  private  corporation  by  lease  on  terms  alleged  by  the  corpora- 
tion baiters  to  be  rank  robbery  of  the  people.  For  years  the 
transaction  was  pointed  to  as  a  horrible  example  of  corporation 
outrage  and  spoliation  of  the  people — not,  of  course,  through  the 
fault  of  the  people,  but  because  of  corporate  greed. 

Finally  it  was  discovered  that  the  bargain  had  proved  an 
excellent  one ;  that  the  quality  of  gas  had  been  improved,  the 
price  cheapened,  the  works  rebuilt  and  extended,  while  the  city 
received  nearly  half  a  million  a  year  in  cash  payments.  What  is 
the  moral?  Why,  the  municipality,  not  having  managed  its  own 
affairs  as  ably  and  honestly  as  the  much-maligned  gas  company 
had  conducted  the  gas  business,  sought  to  raise  a  vast  sum  of 
needed  cash  in  lump  payment  for  a  further  extension  of  its  val- 
uable privileges,  thus  discounting  its  rentals  for  many  years ;  and 
that  is  how  one  government  demonstrated  its  fitness  for  higher 
things.'  The  country  is  studded  with  towns  that  have  had  unsat- 
isfactory experience  with  ownership  and  operation  of  water  and 
electric-light  plants,  and  have  turned  them  over,  or  are  seeking 
to  turn  them  over,  to  private  companies ;  and  in  almost  every 
instance  there  has  been  a  faction  that  complained  of  the  alleged 
conspiracy  of  certain  of  their   officials   with  capitalists. 

While  reliable  statistics  are  yet  lacking  to  demonstrate  the 
results  of  extensive  government  ownership  and  operation  which 
I  have  predicted,  there  are  enough,  not  only  to  destroy  faith  in^ 
the  roseate  claims  of  the  public-ownership  apostles,  but  to  point 
a  distinct  warning  of  the  danger.    The  statistics  are  in  too  many 


190  SELECTED    ARTICLES 

instances  discovered  to  be  deceptive  in  the  favorable  results  they 
show.  In  several  particulars  is  this  true.  They  are  given  to 
omitting  proper  charges  for  depreciation.  This  especially  in 
respect  to  electric-lighting  plants,  where  depreciation  and  obso- 
lescence have  been  very  costly.  They  frequently  fail  to  show  the 
true  cost  of  operation  by  neglecting  to  state  the  services  given 
the  works  by  other  departments  of  the  city  government,  and  the 
sums  that  are  lost  in  taxes  that  would  be  paid  under  private 
ownership ;  also  the  quality  of  service  rendered.  And,  besides, 
the  scheme  has  been  tested  on  too  limited  a  scale  to  permit  of 
jumping  at  enthusiastic  conclusions.  There  have  been,  if  nothing 
else,  too  large  a  percentage  of  known  failures,  so  far  as  the  test 
has  gone. 

But  against  this  warning  we  are  handed  a  flowery  statement 
of  results  in  Europe,  and  especially  in  England  and  Scotland. 
This  is  carrying  the  argument  away  from  our  conditions,  and 
even  if  the  known  facts  over  there  were  more  favorable  than  they 
are,  it  would  not  warrant  our  attempting  to  follow  their  example. 
As  to  results  in  Great  Britain,  however,  the  game  has  not  been 
played  through,  and  the  final  score  will  not  be  shown  for  years 
to  come.  It  may  be  conceded  that,  if  an\'  country  possesses  a 
system  and  character  of  government  capable  of  engaging  suc- 
cessfully in  government  trading,  Britain  is  that  country.  Yet  we 
have  reports  of  antiquated  instruments  in  municipal  telephone 
systems,  of  lack  of  enterprise  in  perfecting  and  extending  the 
service  which  would  be  borne  with  sour  grace  in  American  cities. 
.Not  only  has  the  service  been  poor,  but  in  some  instances  the 
operation  has  been  at  a  loss.  The  same  may  be  said  of  municipal 
electric  lighting  in  Great  Britain.  The  service  is  complained  of, 
and  in  a  number  of  cities,  including  Glasgow,  Edinburgh,  Bath, 
and  Bristol,  has  been  operated  at  a  loss.  As  for  the  municipal 
tramways  in  England  and  Scotland,  American  travelers  are  prac- 
tically a  unit  in  declaring  that  most  of  the  systems,  and  the 
methods  of  operating  them,  would  not  be  tolerated  in  America, 
even  those  often  quoted  as  examples  of  municipalization  success, 
such  as  Glasgow  and  Edinburgh. 

Of  most  vital  importance  is  the  problem  of  municipal  indebt- 
edness which  the  experiment  has  created.  More  than  two  thou- 
sand million   of  bonds  have  been  issued  in   England  to   extend 


MUNICIPAL   OWNERSHIP  191 

municipal  trading,  and  the  investments  have  in  some  instances 
already  affected  municipal  credit.  Some  lines  about  London  are 
already  a  charge  to  taxpayers,  and  the  leading  newspapers  are 
sounding  the  alarm  as  to  what  may  be  the  ultimate  result.  There 
has  also  been  observed  an  effect  on  the  industrial  system  of  the 
country,  and  the  subject  of  the  displacement  of  private  enterprise 
and  responsibility  by  government  is  awakening  much  serious, 
thought. 

The  day  has  not  arrived  when  we  may  point  to  England's 
example  as  one  which  America  may  safely  follow. 

Patient,  disinterested  examination  of  the  subject  in  its  various 
phases  does  not  discover  any  warrant  in  experience,  political 
conditions,  or  the  purpose  of  government,  as  viewed  by  the  clear- 
est intelligence  of  recent  times,  for  the  assumption  that  public 
trading  would  prove  the  public  blessing  so  confidently  claimed 
for  it  by  its  advocates.  This  will  apply  either  in  the  case  of 
municipal  or  federal  government  engaging  extensively  in  busi- 
ness. It  is  characteristic  of  propagandists  to  indulge  in  positive 
assertions — not  merely  to  believe  and  prophesy,  but  to  declare 
future  results.  That  it  is  the  true  purpose  of  government  to 
conduct  the  chief  commercial  enterprises  of  this  country,  or  any 
considerable  portion  of  them,  no  man — no  American,  at  least — has 
any  right  to  declare.  That  the  results  of  municipal  trading  in 
America,  so  far  as  it  has  been  tried,  have  been  entirely  success- 
ful, as  has  been  frequently  asserted,  statistics  so  far  obtainable 
do  not  prove.  It  cannot  truthfully  be  stated,  without  qualifica- 
tion, that  experience  so  far  in  municipal  ownership  and  operation 
has,  as  a  whole,  been  of  greater  benefit  to  the  people  than  pri- 
vate ownership  and  operation  in  the  same  instances  would  have 
been. 

A  hopeful  theory  is  that  by  imposing  ownership  and  opera- 
tion of  industrial  enterprises  on  city  governments  the  quality 
of  citizenship  will  be  raised,  because  citizens  will  then  take 
greater  interest  in  city  affairs.  It  would  not  be  difficult  to 
prove  by  history  that,  the  more  paternalistic  governments  have 
become,  the  less  responsibility  has  been  shown  by  their  citizens 
or  subjects.  But  it  is  not  necessary  to  enter  such  an  argument. 
For    the    accepted    doctrine    of    free    government    is,    that    it 


192  SELECTED    ARTICLES 

should  protect  the  people  and  guard  their  interests  by  reason- 
able regulation  and  control,  and  not  that  it  should  conduct  the 
business   of   the   people. 

The  plea  that  government  cannot  properly  control  corporate 
operations,  or  that  it  will  not  do  so,  is  a  pitiful  one.  It  must 
be  conceded  that  in  many  things  government  has  not  done 
so.  But  that  being  the  natural  function  of  government,  there 
can  be  no  question  that  it  should  first  demonstrate  its  efficiency 
in  that  duty  before  engaging  in  commercial  experiments,  even 
if  the  latter  should  be  admitted  a  proper  course  for  it  to  take 
in  any  event.  Let  the  protests  of  the  people  against  corporate 
derelictions  be  directed  to  enforcing  adequate  control.  Let 
the  errors  that  have  been  made  in  the  past  through  wasted  fran- 
chises, excessive  privileges,  inadequate  laws  and  charters,  be 
remedied  as  fast  the  nature  of  the  various  cases  will  permit. 
Clean  the  administration  offices.  Keep  able  men  in  office  longer, 
the  delinquents  not  so  long.  Perfect  the  merit  system,  not  in 
a  way  that  it  will  help  shirking  inefficients  to  retain  their 
places,  but  so  that  it  will  more  surely  encourage  merit.  Deal 
with  corporate  interests  with  a  view  to  the  greatest  public  ^ 
advantage,  not  merely  with  the  view  of  carrying  out  arbitrary 
ideas  of  short-term  franchises  or  municipal  purchase. 

Government  control  and  regulation  are  natural  functions. 
If  they  be  properly  exercised,  they  must  prove  more  beneficial 
to  the  people  than  government  trading.  They  will  insure  im- 
proved service  of  public  utilities,  which  municipalization  does 
not.  They  will  increase  the  public  revenues  by  compensation, 
without  the  danger  of  increased  public  burdens.  Strict  govern- 
ment control  is  more  likely  to  decrease  political  corruption  than  is 
government  trading,  as  the  management  would  not  be  swayed 
by  political  considerations;  this  with  special  reference  to  traction 
properties  employing  large  numbers  of  men. 

What  may  be  effected  through  wise  control  and  regulation  is 
exemplified  in  the  street  and  elevated  railway  service  at  Boston, 
concise  explanation  of  which  has  recently  been  given  to  the  read- 
ing public  by  Mr.  Hayes  Robbins.  It  is  not  too  much  to  say  that 
Massachusetts  and  Boston  have,  in  fact,  fairly  solved  the  problem 
of  public  control  and  regulation.  In  quality  of  service;  in  mile- 


MUNICIPAL   OWNERSHIP  193 

age  of  track  in  proportion  to  population;  in  benefits  to  the 
public  treasury,  and  in  all  things  that  constitute  satisfactory- 
urban  transportation,  we  have  the  highest  testimony  that  this 
system  is  superior  to  any  in  Europe;  while  the  uniform  five-cent 
rate  of  fare,  compared  with  the  zone  rates  there,  is  no  higher, 
and  wages  of  employees  average  twice  as  high. 

Now,  what  has  been  done  in  Massachusetts  may  be  re- 
peated in  every  state  in  the  Union,  not  only  with  respect  to 
tramways,  but  also  as  to  lighting,  telephone  service,  and  water 
supply.  It  was  observed  as  far  back  as  Aristotle  that  com- 
munity of  property  was  not  a  practicable  scheme  for  populous 
communities.  How  true  that  observation  was  is  attested  by  the 
fact  that,  while  it  has  frequently  been  attempted,  by  almost 
every  character  of  people  and  under  almost  every  social  con- 
dition, it  has  failed  in  every  instance.  The  more  extensive  the 
municipilization  ideas  are  put  into  experiment,  the  nearer  we 
approach  the  community  of  property  system,  and,  according  to 
all  human  experience,  the  nearer  to  governmental  and  indus- 
trial chaos. 


American  Journal  of  Sociology.   10:  787-813.  May,   1905. 

Public  Ownership  Versus  Public  Control.  Hayes  Robbins. 

When  it  was  first  announced  that  the  Citizens'  Union  of 
New  York  was  entering  upon  a  campaign  to  increase  the  range 
of  municipal  powers  so  as  to  include  ownership  and  operation, 
among  other  things,  of  street  railways,  gas  and  electric-light 
service,  it  was  regarded  as  something  of  a  politico-economic 
sensation.  The  extraordinary  feature  was  not  the  character 
of  the  proposition  itself.  Municipal  ownership  is  no  novelty, 
either  as  a  theory  in  this  country  or  as  a  practical  accomplish- 
ment in  Europe,  especially  in  Great  Britain.  But  that  an  organi- 
zation of  the  civic  prominence  and  influence  of  the  Citizens' 
Union  should  select  the  opening  months  of  a  new  Tammany 
administration  to  start  the  machinery  at  the  state  capitol  for  a 
■constitutional  amendment  permitting  these  new  city  functions, 
was  unique  in  American  political  history,  to  say  the  least. 


194  SELECTED    ARTICLES 

Had  the  last  municipal  election  in  New  York  continued  the 
reform  administration  in  office,  a  suggestion  for  adding  an  im- 
mense new  set  of  complex  responsibilities  and  powers  to  the 
city  government's  activities  certainly  would  have  seemed  less 
eccentric  than  coming,  as  it  did,  close  upon  the  heels  of  the  most 
striking  demonstration  ever  afforded  of  the  insecurity  of  clean, 
able,  and  nonpartisan  government  in  the  great  "social  experi- 
ment" city  of  the  New  World. 

But  these  are  points  of  political  expediency  rather  than  of 
principles  at  stake.  The  larger  importance  of  any  such  move- 
ment does  not  lie  in  the  sensational  interest  of  an  unpropitious 
launching,  but  in  the  fact  that  it  raises  again  (and  each  time 
more  seriously,  whatever  the  outcome  of  the  particular  agitation) 
the  issue  of  the  wisdom  and  practical  feasibility  of  taking  the 
government  into  these  exacting  and  complicated  fields  of  indus- 
trial responsibility  and  management.  This  is,  indeed,  a  large 
issue;  and  if  a  fresh  discussion  of  it  leads  to  nothing  more  con- 
crete than  the  remedying  of  certain  abuses  in  existing  systems, 
and  establishing  more  equitable  and  satisfactory  relations  be- 
tween the  community  and  public-service  corporations,  it  will 
have  been  well  worth  while. 

The  demand  for  public  ownership  and  operation  of  street 
railways,  lighting  facilities,  etc.,  is  often  based  upon  the  broad 
contention  that  the  furnishing  of  "common  necessities"  ought 
logically  to  be  in  the  hands  of  all  the  people.  The  argument  is 
obviously  careless,  in  that  it  would  equally  justify  state  produc- 
tion of  wheat,  sugar,  coal,  oil,  meats,  cotton,  and  wool — what- 
ever, in  fact,  has  come  to  be  regarded  as  a  "necessity"  of  life. 
The  real  distinction  comes  in  when  the  article  in  question  is 
not  only  a  public  necessity,  but  is  supplied  under  practically 
monopolistic  conditions.  There  is  a  separate  grouping  of  indus- 
tries of  this  class,  which  is  recognized  in  the  practical  policies 
of  virtually  all  civilized  countries.  From  time  immemorial  gov- 
ernments have  elected  to  take  over  the  control  and  operation  of 
so-called  '"natural  monopolies;"  whether  it  was  the  development 
of  valuable  natural  products,  especially  rare  mineral  deposits,  or, 
in  more  recent  times,  the  furnishing  of  water  supply,  drainage 
systems,    street-lighting,    and    even    in    some    cases    of    public 


MUNICIPAL   OWNERSHIP  195 

transportation  and  communication  facilities.  The  instinctive 
appreciation  that  the  peculiar  character  of  such  industries  calls 
for  and  justifies  something  more  than  a  laissez-faire  policy  is 
what  underlay  the  very  general  support  of  the  President's  inter- 
vention in  the  coal  strike.  The  act  was  unofificial,  to  be  sure,  but 
morally  it  had  the  effect  of  an  assertion  of  the  sovereign  popu- 
lar right  to  take  a  hand  in  the  conduct  of  a  virtually  monopolis- 
tic industry  supplying  a  necessity  of  life. 

The  principle  has  steadily  become  clearer  that,  where  com- 
petition is  impossible  or  ineffective,  some  outside  agency  is  not 
only  admissible,  but  necessary,  to  supply  or  compel  the  progres- 
sive improvement  and  the  checks  against  extortion  which  natur- 
al conditions  do  not  in  such  case  afford ;  and  since  this  interfer- 
ence is  required  in  the  public  interest,  what  more  natural  than 
that  the  government,  as  the  organized  expression  of  the  people's 
will,  should  be  the  intervening  agent? 

Much  elaborate  argument  has  been  wasted  in  the  vain  effort 
to  show  that  competition  is  really  feasible  under  all  conditions. 
But  public  sentiment  has  become  impatient  of  all  such  obviously 
specious  reasoning  in  defiance  of  known  facts.  Competition 
between  transportation  lines,  or  gas  -and  electric-light  companies, 
or  telephone  systems,  usually  ends  either  in  a  price  agreement, 
or  a  division  of  territory,  or  an  outright  consolidation  of  the 
rival  corporations.  ^Massachusetts  has  frankly  recognized  the 
humbug  of  competition  in  certain  of  these  fields,  and  has  even 
gone  to  the  extent,  as  a  recent  decision  of  its  Board  of  Railroad 
Commissioners,  in  a  case  at  Springfield,  witnesses,  of  declaring 
virtually  that  the  monopoly  is  advantageous  and  should  be  pro- 
tected ;  but  such  an  expression  from  the  source  quoted  must 
always  be  taken  in  connection  with  the  all-important  proviso 
that  the  monopoly  operates  under  a  very  strict  and  comprehen- 
sive system  of  public  control,  and  this  is  precisely  what  Mas- 
sachusetts law  provide. 

Here  is  where  the  real  issue  lies  today.  There  is  less  and  less 
effort  to  galvanize  the  corpse  of  competition  in  the  public-service 
facilities  of  our  cities,  either  in  practice  or  in  theory.  Equally, 
there  is  less  and  less  disposition  to  deny  the  public  right  to  supply 
in  some  way  the  safeguards  which  competition  would  naturally 


196  SELECTED    ARTICLES 

afford  if  it  were  actually  there.  The  vital  question  is  on  the 
how.  And  here  begins  the  cleavage  between  the  public-ownership 
proposition  and  public  control. 

It  will  be  of  interest  to  inquire  into  some  of  the  experience  of 
recent  years,  under  both  systems,  in  this  country  and  abroad. 
So  far  as  strictly  municipal  undertakings  are  concerned,  Great 
Britain  furnishes  pratically  all  the  advanced  experiments  of  large 
importance,  and  unfortunately  the  differences  of  opinion  as  to 
practical  results  are  so  pronounced,  and  the  testimony  so  con- 
flicting, that  positive  conclusions  are  in  many  cases  difificult.  Not 
only  this,  but  in  forming  judgments  very  much  depends  upon 
whether  the  results  under  municipal  operation  at  a  given  time  are 
compared  with  previous  private-management  experience  in  the 
same  community,  or  with  present  American  experience  under 
private   management. 

Take,  for  example,  the  famous  case  of  Glasgow.  The  tracks 
of  the  street-railway  system  were  the  property  of  the  city  from 
the  beginning,  but  were  leased  in  1871  to  the  Glasgow  Tramway 
&  Omnibus  Co.,  for  twenty-three  years.  On  November  12,  1891, 
the  Town  Council  voted  not  to  renew  the  lease,  and  entered  into 
negotiations  with  the  company  for  the  purchase  of  its  equipment. 
These  negotiations  fell  through,  and  the  municipality  thereupon 
purchased  an  entire  new  outfit  for  a  horse-car  line — cars  and 
horses,  barns,  ground,  buildings,  and  machinery.  Why  was  not 
an  electric  system  installed,  as  it  certainly  would  have  been  by 
any  American  private  corporation  taking  possession  of  an  urban 
transportation   system  so  recently  as    1894? 

Mr.  J.  Shaw  Maxwell,  in  a  review  of  municipal-ownership 
experiments,  in  the  Co-operative  Wholesale  Societies'  Annual  for 
1902,  says  it  was  because  there  was  not  time  enough  in  the  two 
years  after  the  negotiations  with  the  private  company  collapsed 
to  the  date  when  the  city  had  to  begin  operations,  to  purchase  and 
install  an  electric  plant.  A  different  explanation  is  indicated  in 
the  very  exhaustive  and  favorable  account  of  the  Glasgow  tram- 
ways, to  which  the  Light  Railzcay  and  Tramivay  Journal  (Lon- 
don) devoted  almost  its  entire  space  in  the  issue  of  July  3.  1903. 
It  appears  that  a  special  committee  was  appointed  as  early  as 
July,  1891,  to  investigate  methods  of  operation  for  the  tramways 


MUNICIPAL   OWNERSHIP  197 

and  a  month  later  reported  in  favor  of  "mechanical  traction  :"  but 
they  could  not  agree  on  whether  it  should  be  electric,  cable, 
compressed-air,  or  gas-motor. 

The  subcommittee  were  busy  considering  the  question  until 
after  the  following  May,  when  they  decided  that  it  would  be  im- 
practicable to  start  the  service  with  mechanical  traction,  and  that 
the  safest  course  would  be  to  start  with  horses  and  wait  further 
developments  in  regard  to  the  various  forms  of  traction. 

In  October,  1902, 

offers  were  received  for  erecting  and  completing  an  electric  instal- 
lation, with  all  plants,  appliances,  rolling-stock,  etc.,  necessary  for 
working  about  eight  miles  of  the  tramways  in  the  northern  part  of 
the  city,  including  the  Springburn  route,  on  the  overhead  system, 
but  the  committee  did  not  then  see  their  way  to  recommend  the 
acceptance   of  any  of  the   offers. 

Not  until  five  years  later  was  even  a  short  experimental  line 
authorized,  and  the  principal  reason  seems  to  have  been  that 
"there  was  as  yet  no  general  concensus  of  opinion  as  to  which 
was  the  best  system  of  mechanical  traction."  The  first  test-line 
was  opened  in  1898,  and  in  the  following  year  a  complete  change 
to  the  electric  system  was  voted.  The  last  horse-car  was  with- 
drawn from  service  in  1901. 

There  is  a  conflict  of  testimony  also  with  regard  to  the  finan- 
cial results  of  the  Glasgow  undertaking.  It  appears  that  in  the 
twenty-three  years  of  the  lease  to  the  private  company  nearly 
$1,700,000  had  been  expended  on  capital  construction  account,  of 
which  upward  of  $980,000  had  been  paid  off  by  the  tramway 
company,  which  also  had  expended  some  $617,000  on  the  re- 
newal of  permanent  way,  and  contributed  some  $309,000  in 
clear  cash  profit  to  the  city.  Statements  of  percentages  of  profit 
made  by  the  municipality  since  1894  make  a  considerably  better 
showing  when  the  capital  basis  upon  which  they  are  computed 
includes  (in  addition,  of  course,  to  later  expenditures)  only  the 
net  debt  upon  the  system  at  the  time  of  the  transfer,  than  when 
it  includes,  as  it  should,  the  total  investment  up  to  that  time,  of 
which  almost  two-thirds  had  been  contributed  free  and  clear  by 
the  operating  company. 

Another  easy  way  of  getting  an  erroneous  impression  of  finan- 
cial results  is  to  compare  the  average  annual  payments  to  the 
"Common  Good,"  or  net  profit  fund,  during  the  whole  twenty- 
three  years  of  the  lease  with  the  annual  payments  into  that  fund 
since   1894.    By  this   method   it   appears  that   only  about  $13,500 


198  SELECTED    ARTICLES 

per  year  went  to  the  city's  profit  account  prior  to  municipal  man- 
agement, while  in  the  first  year  after  the  change,  1894-95,  the 
amount  so  paid  was  $40,193;  in  the  four  succeeding  years, 
$43,794  each;  in  the  next  three,  $60,825;  in  1902-3,  $121,650; 
and  Mr.  John  Young,  the  general  manager  of  the  system,  informs 
the  writer  that  "it  has  been  decided  that  this  sum  shall  be  paid 
over  to  the  Common  Good  annually  in  the  future." 

But   the   $13,500    average    for   the   twenty-three   years    before 

1894  of  course  includes  all  the  meager  early  years,  from  the  time 
when  the  total  capital  investment  of  the  system  was  less  than 
$17,000.  If,  instead  of  stating  the  payments  to  the  "Common 
Good"  as  an  average  for  the  whole  period,  the  figures  are  given 
year  by  year,  as  is  done  for  the  period  since  the  lease,  it  appears 
that  the  amounts  increased  steadily  prior  to  1894  ^s  well  as  since, 
and  in  the  last  year  under  the  old  system  amounted  to  over  $27,- 
000 ;  in  the  last  thirteen  months,  over  $32,000.  Further,  it  should 
not  be  overlooked  that  if  Glasgow  had  been  obliged,  as  any 
private  corporation  purchasing  the  plant  would  have  been,  to  pay 
annual  interest,  say  at  2^/2  per  cent.,  on  the  $980,000  of  capital 
investment  which  had  been  paid  up  by  the  private  company,  the 
amount  available  for  Common  Good  would  have  been  less  by 
about  $24,500  each  year  than  it  actually  has  been  since  the  city 
began    operations.    In    other    words,    instead    of    $43,794    from 

1895  to  1899,  it  would  have  been  about  $19,300  in  each  of  those 
years;  instead  of  $121,650  today,  it  would  be  just  over  $97,000. 

On  the  other  hand,  on  the  basis  of  what  the  old  company 
actually  was  accomplishing  just  prior  to  1894,  with  the  same 
unpaid  capital  debt  to  carry  as  that  taken  over  by  the  city,  the 
municipal  management  has  steadily  increased  the  net  return  to 
the  "Common  Good,"  and  that  with  some  reduction  of  fares, 
installation  of  a  modern  system,  and  altogether  improved  service. 

And  it  is  further  to  be  noted  that  the  movement  toward 
municipalization  of  British  tramways  is  steadily  forging  ahead. 
Huddersfield  has  been  operating  its  own  system  since  1882; 
Plymouth  and  Blackpool,  since  1893;  Leeds,  since  1894; 
Sheflf^eld,  since  1896;  Liverpool,  since  1897;  while  Manchester 
has  only  recently  undertaken  the  same  experiment,  the  largest 
of  the  kind  in   England,  covering  nearly   150  miles  of  trackage. 


MUNICIPAL   OWNERSHIP  199 

In  1901,  56  propositions  for  municipalizing  tramways  were 
authorized,  the  estimated  cost  ranging  from  about  $23,000  to 
$14,600,000.  According  to  the  Board  of  Trade  Returns  spe- 
cially obtained  on  this  subject  in  1900,  70  out  of  a  total  of  177 
tramway  systems  were  then  under  public  ownership  and  manage- 
ment, and  these  70  represented  a  total  expenditure  on  capital 
account  of  $49,650,737,  as  against  $56,116,580  for  the  107  private 
corporations. 

The  circumstance  above  all  others  which  has  made  fairly 
satisfactory  results  possible,  as  compared  with  the  previous  sys- 
tems, is  the  relatively  high  character  of  British  municipal  admin- 
istration. Through  long  traditions  of  decency  and  much  clarifying 
experience,  these  cities  have  developed  the  habit  of  picking  men 
of  honorable  repute,  business  experience,  and  capacity  for  public 
service ;  and  but  for  this  fact  it  is  altogether  probable  that  the 
experiments  would  have  proved  disastrous  failures.  To  cite  a 
few  cases  by  way  of  illustrating  the  average  composition  of  the 
governing  bodies  of  English  municipalities :  in  1901  the  City 
Council  of  Birmingham  contained  forty  manufacturers  and 
tradesmen  associated  with  the  metal  and  cutlery  trades ;  in  Brom- 
ley nearly  half  the  members  were  manufacturers  and  tradesmen, 
connected  chiefly  with  the  cotton  industry;  in  Hull  the  shipping 
interests  were  strongly  represented ;  in  Huddersfield  woolen 
manufacturers  were  prominent ;  in  Sheffield  the  staple  industry 
was  represented  in  all  its  phases,  from  corporation  directors  to 
steel-workers  and  molders  ;  in  Glasgow  the  municipal  corporation 
consisted  of  twenty-one  merchants  and  shopkeepers,  twenty-six 
manufacturers  and  tradesmen,  sixteen  professional  men,  four 
following  no  calling,  while  the  great  trading  interests  of  the  city 
were  well  represented. 

In  spite  of  all  the  favorable  features,  public  opinion  in  Great 
Britain,  while  strongly  tending  toward  municipal  ownership  in 
many  quarters,  is  by  no  means  a  unit  on  the  practical  results 
achieved  down  to  date.  Mr.  Maxwell  himself,  although  a  believer 
in  municipalization,  quotes  a  number  of  critical  judgments;  for 
example,  that  of  Mr.  Benjamin  Taylor,  in  the  electric  railway 
number  of  Cassier's  Magazine,  that  "generally  speaking,  the  most 
perfect  tramway  system  is  procurable  when  the  municipality  owns 


200  SELECTED    ARTICLES 

the  track  and  leases  the  lines  to  a  company  under  municipal 
regulations."  Mr.  Taylor  reviewed  the  experience  of  Glasgow, 
Huddersfield,  Blackpool,  Leeds,  Sheffield,  and  Plymouth,  and 
expressed  the  conviction  that 

In  no  single  instance  has  it  [municipal  operation]  been  perfectly 
successful.  Glasgow  furnishes  the  nearest  approach  to  success, 
but  in  Glasgow,  with  a  small  track  for  an  enormous  dependent 
population,  it  would  take  very  bad  management  indeed  to  produce 
financial  failure.  .  .  .  Any  well-managed  company,  in  posses- 
sion of  the  advantages  which  any  of  these  corporations  [municipali- 
ties] whose  work  has  been  reviewed,  possesses,  would  have,  long 
ere  this,  produced  inuch  better  results  both  for  itself  and  for  the 
public. 

Whatever  may  be  the  conclusion,  however,  as  to  public  versus 
private  tramways  in  Great  Britain,  when  we  compare  the  results 
under  the  very  best  of  the  municipalized  systems  with  those 
realized  in  many  of  the  larger  American  cities,  the  differences  are 
pronounced.  Dr.  Albert  Shaw%  author  of  Municipal  Governuient 
in  Great  Britain,  who  has  sometimes  been  quoted  as  an  advocate 
of  municipal  ownership,  declared  before  a  committee  of  the  New 
York  legislature :  "1  have  never  dreamed  of  advocating  municipal 
ownership  in  the  city  of  New  York.  I  have  never  thought  of  it 
as  a  remedy."  And,  as  to  foreign  cities :  "I  never  believed  any 
experience  derived  from  them  of  any  applicability  to  our  cities. "~ 
Mr.  Charles  Francis  Adams,  who  was  a  member  of  the  special 
Massachusetts  investigating  committee  appointed  in  1897,  and 
whose  right  to  speak  with  considerable  authority  on  these  matters 
is  unquestionable,  declares  that  he  has  "never  yet  found  in 
Europe  anywhere  a  case  of  municipal  or  public  transportation 
worthy  an  instant's  consideration  as  compared  with  our  own," 
This  has  the  appearance  of  an  extreme  view,  to  be  sure;  but  con- 
crete facts  go  a  long  way  in  support  of  it. 

Suppose,  for  example,  the  comparison  is  made  between  the 
Glasgow  experiment,  w^hich  is  decidedly  the  most  favorable  for 
municipal  ownership  that  could  be  taken,  and  the  Boston  system, 
which,  if  it  is  indeed  the  best  in  the  United  States,  has  many  a 
close  second  so  far  as  practical  operation  is  concerned,  whatever 
may  be  said  of  the  general  fiscal  relations  with  the  community. 
Of  that,  more  later. 

Glasgow  today  has  139  miles  of  tramway,  measured  as  single 
track.   The  population   of  the  city  is   about  800,000;   and   in  the 


MUNICIPAL   OWNERSHIP  201 

financial  statement  and  general  account  issued  by  the  Tramways 
Committee  the  total  population  served,  including  the  suburbs,  is 
given  as  one  million.  The  Boston  Elevated  Railway  Co.  operates, 
as  a  unit,  some  440  miles  of  elevated,  subway,  and  surface  lines, 
and  serves  approximately  the  same  aggregate  population,  includ- 
ing the  suburbs.  In  other  words,  Glasgow  has  one  mile  of  track 
for  every  7,200  of  population,  in  round  numbers ;  Boston,  one 
mile  for  every  2,270.  The  Glasgow  system  in  1902-3  carried 
177,179,594  passengers;  the  Boston  company  carries  about 
236,000,000  paying  passengers,  of  whom  130,000,000  use  free 
transfers,  making  366,000,000  separate  trips  furnished.  The 
average  daily  traffic  is :  Glasgow,  485,000 ;  Boston,  1,000,000. 
The  Glasgow  rolling-stock  consists  of  about  680  cars  of  all  kinds ; 
the  Boston  company  owns  over  3,300.  The  average  number  of 
cars  operated  in  one  day  in  Glasgow  is  now  about  450;  in  Bos- 
ton. 1,300.  Thus  Boston  operates  one  car  for  every  770  passeng- 
ers carried  each  day;  Glasgow,  one  car  for  every  1,077. 

This  difference  is  reduced,  however,  by  the  fact  that  prac- 
tically all  the  Glasgow  cars  are  "double-deckers,"  seating  from 
50  to  55  passengers.  A  car  seating  55  provides  for  25  inside  and 
30  on  the  roof.  The  equipment  of  the  Boston  system  is  varied, 
including  174  elevated-railway  cars  seating  48  passengers,  with 
comfortable  standing-room  for  50  more;  nearly  1,600  surface- 
railway  box-cars  of  different  sizes,  the  great  majority  seating  34 
passengers  each;  and  more  than  1.500  open  cars  for  summer  use, 
seating  from  40  to  60  according  to  the  number  of  benches.  In 
winter,  therefore,  although  Boston  operates  about  40  per  cent. 
more  cars  in  proportion  to  traffic  than  Glasgow,  the  average 
seating  capacity  of  a  car  on  the  Glasgow  system  is  greater  than 
that  of  Boston  surface  cars  by  an  even  larger  percentage ;  but 
this  does  not  apply  to  carrying  capacity.  The  standard  surface 
car  on  the  Boston  system  is  25  feet  long,  exclusive  of  platforms; 
in  Glasgow,  only  17  feet;  which  means,  of  course,  less  standing- 
room  inside.  And  there  can  be  little  doubt  as  to  which  of  the  two 
evils  is  to  be  preferred,  for  winter  travel — standing-room  inside 
a  warm  car,  or  a  seat  on  the  roof,  exposed  the  cold  and  fre- 
quently to  storms.  This  exposure  to  weather,  by  the  way,  is  a 
permanent  feature  of  "upper-deck"  travel  on  the  Glasgow  cars. 


202  SELECTED    ARTICLES 

summer  or  winter ;  a  second  roof,  or  cover  of  any  sort,  has  been 
found  impracticable  on  account  of  the  many  bridges  under  which 
the  cars  must  pass. 

A  new  type  of  box-cars,  the  largest  size  that  can  be  used  on 
many  of  the  crooked  streets,  and  seating  36  passengers,  is  being 
installed  on  the  Boston  lines.  And  it  is  somewhat  unjust  to  the 
Boston  system,  moreover,  to  estimate  the  average  seating  ca- 
pacity solely  on  the  basis  of  standard  surface  cars,  even  though 
there  are  1,600  of  these  and  only  174  of  the  elevated  cars,  which 
seat  48  each.  An  elevated  car  runs  many  more  miles  in  a  day 
than  a  surface  car,  and  hence  handles  a  much  larger  relative  pro- 
portion of  the  traffic.  While  there  are  less  than  one-ninth  as 
many  elevated  as  either  type  of  surface  cars,  the  mileage  made  by 
the  elevated  cars  is  more  than  one  sixth  of  the  total  made  by  the 
surface.  This,  of  course,  increases  the  average  seating  capacity  of 
the  rolling-stock  as  a  whole. 

In  summer  the  average  seating  capacity  of  the  elevated  and 
open  surface  cars  on  the  Boston  system  is  nearly,  if  not  fully, 
equal  to  that  of  the  Glasgow  cars,  and  this  with  protection  from 
the  w'eather,  .and  without  the  delays  and  inconvenience  in  requir- 
ing passengers  to  climb  to  the  roof.  Double-deck  cars  were  tried 
in  Boston  at  one  time,  but  abandoned  because  it  was  found  im- 
possible to  handle  heavy  traffic  with  sufficient  expedition ;  and  it 
is  chiefly  on  this  account,  in  fact,  that  the  street-railway  judg- 
ment of  this  country  has  been,  on  the  whole,  against  the  use  of 
this  type  of  rolling-stock. 

The  Glasgow  system,  June  i,  1903,  wath  130  miles  (measured 
as  single  track),  represented  a  total  capital  investment  of 
$13,405,024,  or  $103,115  per  mile.  The  Boston  system,  including 
stock^and  bonds  of  leased  lines,  is  capitalized  at  a  little  less  than 
$/| 4,500,000 ;  and  if  to  this  be  added  the  cost  of  the  city-owned 
subway,  on  which  cost  the  company  pays  the  interest  and  a 
liberal  sinking-fund  contribution,  the  total  capital  investment 
becomes  approximately  $48,500,000,  or  $110,227  per  mile.  There 
is  no  presumption  of  overcapitalization  here,  as  compared  with 
Glasgow,  in  view  of  the  costly  elevated  and  subway  sections 
which  form  a  part  of  the  Boston  service,  and  of  the  further 
fact  that  labor  cost   of   construction  in   this   country  includes   a 


MUNICIPAL   OWNERSHIP  203 

wage-rate  practically  double  that  of  Scotland,  and  which  is  only 
partially  offset  by  the  superior  skill  and  energy  of  our  workmen. 

The  Boston  system,  with  earnings  of  about  $12,000,000  an- 
nually, pays  a  direct  tax  of  seven-eighths  of  one  per  cent,  on 
gross  earnings,  a  state  corporation  tax  of  about  $16  per  $1,000  of 
market  value  of  the  stock,  and  local  taxes  on  its  real  property,  in 
the  various  municipalities  through  which  its  lines  pass,  ranging 
from  $15  to  $20  per  $1,000  of  assessed  valuation;  and,  in  addi- 
tion, is  required  to  remove  snow  and  ice  from,  and  maintain  the 
paving  on,  the  street  surface  occupied  by  its  tracks.  The  interest 
which  it  pays  on  the  cost  of  the  subway  is  sufficiently  in  excess  of 
the  interest  the  city  has  to  pay  on  the  bonds  issued  for  its  con- 
struction, to  retire  the  bonds  and  make  the  subway  the  city's 
property  free  and  clear  in  less  than  forty  years. 

The  total  of  these  taxes  and  service  obligations,  and  excess 
interest  payment,  now  amounts  to  upward  of  $1,550,000  a  year, 
or  nearly  13  per  cent,  of  the  gross  earnings.  Glasgow,  with  a 
street-railway  revenue  of  $3,178,471,  in  1902-3,  paid  into  the 
"Common  Good"  $121,650;  to  which  should  be  added  the  taxes 
which  the  municipality  as  a  whole  assesses  upon  the  tramway 
property,  amounting  in  1902-3  to  $88,488.  A  further  addition 
•should  be  made  of  $83,982,  being  the  average  annual  payment  by 
the  Tramway  Committee  since  1894  into  the  sinking-fund  for 
reduction  of  the  capital  debt;  these  payments,  of  course,  are 
profit  to  the  municipality,  in  that  they  give  it  that  much  clear  in- 
terest in  the  property  as  an  asset.  The  total  of  these  payments 
which  go  to  the  public  good  is  $294,120,  or  slightly  over  9  per  cent. 
of  the  gross  revenue.  The  Boston  corporation,  serving  the  same 
population  as  the  Glasgow  lines  touch,  pays  to  public-benefit  ac- 
count more  than  five  times  the  gross  amount  so  paid  by  the 
Glasgow  system,  and  39  per  cent,  more  in  proportion  to  earnings. 

The  question  of  fares  cannot  be  considered  apart  from  that  of 
the  amount  of  service  furnished.  What  are  the  facts,  then,  as 
between  Glasgow  and  Boston?  Glasgow  has  a  graduated  scale  of 
fares,  ranging  from  i  cent  for  a  little  over  half  a  mile  to  8  cents 
for  nine  miles.  The  standard  5-cent  fare  in  this  country  takes  a 
passenger  5.8  miles  in  Glasgow.  Needless  to  say,  the  confusion 
and   complications   of  such   a   system,    for   the   varying  distances 


204  SELECTED    ARTICLES 

traveled,  would  prohibit  it  from  meeting  the  demand  for  the 
utmost  possible  expedition  on  our  large  American  city  transit 
systems.  Even  more  serious  is  the  increasing  rate  of  penalty  it 
imposes  upon  the  wide  distribution  of  traffic,  and  hence  upon  the 
building  up  of  workingmen's  homes  in  the  suburbs. 

In  Boston  the  uniform  fare  is  5  cents,  and  by  means  of  the 
•  free-transfer  privilege  it  is  possible  for  this  sum  to  ride  from  one 
end  of  the  system  to  the  other,  fully  20  miles.  Wage-earners  and 
clerks  employed  in  the  business  districts  can  live  8  to  9  miles  out 
and  ride  to  and  from  their  homes  for  5  cents,  while  the  Glasgow 
"suburbanite,"  to  travel  equal  distances,  if  the  lines  extended  that 
far,  would  have  to  pay  7  and  8  cents,  respectively.  A  journey  of 
15  or  16  miles  out  from  central  points  in  Boston,  by  connection 
with  outlying  suburban  lines,  may  be  taken  for  10  cents,  and  20 
to  25  miles  for  15  cents.  The  same  distances  under  the  Glasgow 
rates  would  cost  13,  14,  18,  and  22  cents,  respectively. 

The  short  ride  and  congested-district  character  of  the  Glas- 
gow service  must  be  borne  in  mind  in  connection  with  the  fact 
that  the  average  amount  received  per  passenger,  based  on  the  re- 
turns of  annual  earnings,  is  a  little  less  than  2  cents.  In  Boston, 
counting  the  free  transfer  passengers,  it  is  about  3%  cents.  But 
what  is  the  effect  of  the  sliding  scale  on  Glasgow  traflfic?  Simply; 
that  the  great  bulk  of  the  travel  consists  of  short  rides  within 
the  city  limits.  Thirty-six  per  cent,  of  the  passengers  pay  i-cent 
fares — that  is,  ride  only  half  a  mile;  56  per  cent,  pay  the  2-cent 
fare,  covering  2.33  miles ;  only  8  per  cent,  pay  fares  of  3  cents 
and  upward;  in  other  words,  only  8  per  cent,  make  journeys  of 
more  than  3.5  miles. 

To  be  even  more  explicit :  The  most  distant  suburban  point 
to  which  the  Glasgow  tramways  extend  is  Paisley,  6.95  miles. 
To  get  there  costs  6  cents,  or  7  from  the  center  of  the  city.  The 
next  farthest  point  is  Clydebank,  6.39  miles;  fare,  6  cents.  Three 
other  suburbs  are  between  4  and  5  miles,  and  one  about  3^. 
From  Park  Street  station,  Boston,  a  passenger  may  ride  9.53 
miles  to  Arlington  Heights  for  5  cents;  9.83  miles  to  Charles 
River  Bridge;  8.23  miles  to  Arlington  Center;  8  miles  to 
Waverley;  7.9  miles  to  the  Melrose  line;  7.36  miles  to  Milton; 
J.2,  miles  to  Neponset ;  6.32  miles  to  Woodlawn ;  and  6.04  miles 


MUNICIPAL   OWNERSHIP  20s 

to  Lake  Street;  and  the  uniform  fare  for  any  one  of  these  jour- 
neys, or  for  any  two  of  them  in  combination,  through  free  trans- 
fer, is  5  cents. 

The  Glasgow  system  is  not  doing  what  it  might  and  ought 
toward  reHeving  the  terrible  congestion  of  workingmen's  families 
huddled  within  the  cramped  distance  limits.  That  the  need  of 
such  distribution  is  great  appears  from  the  fact  that  more  than 
30  per  cent,  of  the  families  in  Glasgow,  according  to  an  invest- 
igation made  a  few  years  ago,  were  living  in  single  rooms,  as 
compared  with  about  V/z  per  cent,  in  Boston. 

But  there  is  yet  another  most  important  consideration  entering 
into  this  matter  of  fares — the  question  of  wages.  The  relation 
of  wage-rates  paid,  to  the  average  fare  charged,  is  twofold. 

First :  Wages  are  by  far  the  largest  item  of  operating 
expenses,  and,  as  between  two  systems  using  substantially  the 
same  traction  methods  and  carrying  approximately  the  same 
number  of  passengers  per  car,  the  one  paying  the  higher  wages 
must  necessarily  charge  a  higher  rate  of  fare.  If  the  system 
paying  the  higher  wages  also  operates  more  lines  and  furnishes 
a  larger  number  of  cars  for  the  amount  of  traffic  handled,  all 
the  more  reason  why  the  rates  of  fare  must  be  higher. 

Both  Glasgow  and  Boston  use  the  system  of  electric  traction. 
Boston  operates  more  than  three  times  more  track,  and  runs  4a 
per  cent,  more  cars  in  proportion  to  traffic.  How  about  the 
wages.  The  pay  of  motormen  and  conductors  in  Glasgow  ranges 
from  97  cents  per  day  during  the  first  six  months  to  $1.22  after 
three  years  of  service.  In  Boston  surface-car  conductors  and 
motormen  receive  $2.25;  elevated  motormen,  $2.30  the  first  year^ 
$2.40  the  second,  and  ^2.50  the  third;  brakemen,  $1.85;  guards, 
$2.10;  while  all  these  employees  receive  5  cents  per  day  addition- 
al after  five  years  of  service,  10  cents  after  ten  years  and  15  cents 
after  fifteen  years.  These  rates  are  about  double  those  paid  in 
Glasgow. 

From  the  operating  standpoint,  therefore,  whether  it  be  in 
respect  to  wage  expense,  trackage  operated,  or  amount  of  car 
movement,  or  all  three,  as  is  actually  the  case,  there  is  abundant 
reason  for  higher  average  fares  per  passenger  carried  on  the 
Boston  system. 


206 


SELECTED    ARTICLES 


The  second  respect  in  which  the  wage  matter  relates  to  fares 
charged  brings  in  the  question  of  purchasing  power.  The  differ- 
ences between  Boston  and  Glasgow  street-railway  wages  reflect 
similarly  wide  dift'erences  between  the  general  "run"  of  Ameri- 
can and  Scotch  wages  all  along  the  line — not  so  great  in  some 
cases,  of  course;  in  others  greater.  It  is  one  of  the  truisms  of 
economics  that  prices  are  to  be  considered  high  or  low,  not  abso- 
lutely, but  solely  with  reference  to  the  purchasing  power  of  the 
community,  and  in  a  community  where  wages  are  practically 
double  the  rates  prevailing  in  another,  an  average  fare  of  3^ 
cents  would  be,  if  anything,  somewhat  cheaper  than  one  slightly 
under  2  cents  in  the  other;  at  least,  so  far  as  concerns  the  army 
of  wage-earners  and  clerks,  and  their  families,  who  constitute 
the  great  majority  of  the  patrons  of  any  urban  transportation 
system,  and  are  the  people  to  whom  the  matter  of  rates  and 
service   is   of  chief  importance. 

It  may  be  urged,  as  accounting  for  some  of  the  relative  ad- 
vantages of  the  Boston  system,  that  it  is  surrounded  on  all 
sides  by  "feeder"  electric  roads  which  deliver  passengers  from 
an  area  including  a  considerably  larger  population  than  is 
brought  into  touch  with  the  Glasgow  lines.  The  fact  is,  how- 
ever, that  the  bulk  of  the  business  from  this  wider  area  is 
handled  by  the  suburban  service  of  the  steam  railroads.  Hun- 
dreds of  trains  each  day,  in  and  out  of  the  two  great  terminals 
in  Boston,  accommodate  an  immense  traffic,  and  not  only  from 
outlying  points,  but  from  stations  directly  within  the  territory 
of  the  Boston  elevated,  and  in  constant  competition  with  it ;  so 
that  the  accounts  are  probably  square  in  this  respect.  As  a  matter 
of  fact,  the  proportion  of  traffic  on  the  Boston  Elevated  Co.'s 
lines  which  does  not  originate  within  its  own  territory,  compared 
with  the  total  business,  is  small. 

The  reasonable  deduction  from  these  somewhat  extensive 
comparisons  seems  to  be  that,  while  public  ownership  and  opera- 
tion of  street  railways,  under  the  favorable  civic  conditions  of 
British  municipalities,  in  most  cases  give  a  better  and  cheaper 
service  than  was  afforded  by  the  various  private  corporations  it 
supplanted,  even  this  improved  service  is  relatively  meager  in 
extent,  and  usually  of  mediocre  quality,  compared  with  Ameri- 


MUNICIPAL   OWNERSHIP  207 

can  experience ;  and  that  the  municipalized  enterprises  would 
break  down  entirely  if  subjected  to  any  such  tests  as  are  com- 
monly required  under  American  conditions. 

Glasgow  was  selected  for  comparison,  as  already  observed, 
because  it  makes  the  best  showing  for  municipalization,  probably, 
to  be  found  anywhere.  In  other  British  experiments  results  are 
less  favorable,  some  of  them  markedly  so;  but  in  few  of  them 
have  the  facts  ever  been  presented  with  sufficient  clearness  and 
fairness  to  warrant  any  very  precise  comparisons.  The  experi- 
ment of  the  London  County  Council  in  constructing  electric  lines 
in  the  south  of  London  is  a  case  in  point.  It  appears  that  in 
1899  the  council's  experts  estimated  the  expense  of  this  undertak- 
ing at  about  $1,242,000.  It  has  only  recently  been  completed,  and 
proves  to  have  cost  some  $4,800,000.  In  consequence  of  this 
excessive  expenditure,  there  seems  to  be  a  fair  prospect,  accord- 
ing to  the  chairman  of  the  Finance  Committee  of  the  County 
Council,  that  the  expenses,  and  charges  against  these  lines,  will 
exceed  the  income,  and  the  deficit  will  have  to  be  added  to  the 
tax  budget.  Thus  far,  the  net  returns  to  the  council  from  the 
south  London  system  have  not  been  anywhere  near  so  great 
as  those  from  the  leased  lines  on  the  north  side ;  but,  on  the 
other  hand,  the  fares  are  somewhat  higher  on  the  private  lines, 
and  the  service  in   some  respects  not  so  good. 

The  same  uncertainty  exists  in  regard  to  municipalization  of 
electric  lights.  The  London  Times  presents  statistics  showing 
that  during  1901  the  city  of  Salford  lost  $36,441  on  the  operating 
account  alone  of  its  electric-light  plant,  to  say  nothing  of  the 
charges  on  the  $908,803  invested.  Bath  lost  $6,024  in  the  same 
year,  on  a  plant  which  was  purchased  for  $119,217,  and  upon 
which  $379,548  had  been  spent.  Even  after  this  expenditure,  the 
works  broke  down,  and  the  city  tried  in  vain  to  sell  the  outfit  to 
a  private  corporation.  Bedford  lost  $14,598  on  operating  ac- 
count; Bristol,  $12,165;  Morley,  $9,732 ;  Glasgow,  $21,980;  Edin- 
burgh, $13,089.  These  facts  certainly  are  striking.  Granting 
that  the  Times  was  conducting  a  campaign  against  municipal 
ownership,  and  hence  did  not  give  the  statistics  for  cities  which 
may  have  had  more  favorable  experience,  the  specific  cases  here 
cited  are  of  such  importance  as  to  destroy  any  warrant  for  as- 


2o8  SELECTED    ARTICLES 

serting  in  general  terms  that  "municipal  electric  lighting  is  a 
success  in  Great  Britain."  It  would  be  impossible  to  make  such 
a  claim,  evep  if  all  the  other  experiments  were  financially  satis- 
factory. 

Coming  to  the  United  States,  the  briefest  statement  of  the 
situation  shows  how  slight  a  hold  the  public-ownership  idea  has 
obtained  thus  far.  Chicago,  it  is  true,  has  voted  in  favor 
•of  municipal  ownership  of  the  street  railway,  gas  and  electric- 
light  plants ;  but  in  the  present  financial  condition  of  that  city 
there  is  little  prospect  of  the  proposal  getting  any  farther.  Thus 
far,  only  one  community  in  the  land  owns  and  operates  its  own 
street  railways,  namely,  Grand  Junction,  Colo.,  a  town  of  less 
than  5,000  population.  Of  places  of  3,000  population  and 
upward,  193  are  supplied  with  electric  light  by  public  enterprise, 
1,190  by  private;  20  operate  municipal  gas-works,  956  rely  upon 
private  companies;  1,465  have  private  telephone  exchanges, 
while  not  one  has  embarked  in  this  branch  of  municipal  enter- 
prise. Water-works  and  sewers,  the  two  forms  of  municipal  serv- 
ice requiring  relatively  the  least  of  expert  management  and 
trained  business  judgment,  are  much  more  largely  under  direct 
municipal  control;  there  being  only  42  private  sewerage  systems 
against  1,045  public,  and  661  private  water  companies  against 
766  public. 

It  is  interesting  to  note  that  by  far  the  larger  number  of 
municipally  owned  electric-light  plants  and  gas-works  are 
found  in  small  places,  where  the  conditions  are  relatively  sim- 
ple; very  few  of  the  large  cities,  where  the  demands  of  the  sit- 
uation are  complex,  extensive,  and  exacting  have  tried  the  ex- 
periment. Of  cities  of  30,000  inhabitants  and  upward,  only  four 
conduct  municipal  electric-light  w^orks,  and  three  municipal  gas- 
works;  while  in  places  of  3,000  to  5.000  inhabitants,  iii  electric- 
light  plants  are  under  public  management,  and  seven  gas-works. 
In  the  six  largest  cities — New  York,  Chicago,  Philadelphia,  St. 
Louis,  Boston,  and  Baltimore — both  electric  light  and  gas  are 
supplied  by  private  companies,  with  the  partial  exceptions  that 
Chicago  furnishes  her  own  electric-street  lighting,  and  the  Phila- 
delphia gas-plant,  although  leased  to  a  private  corporation,  is 
owned  by  the  city. 


MUNICIPAL   OWNERSHIP  209 

The  Philadelphia  experiment  in  gas-making  is  one  of  the 
interesting  cases  of  municipal  mismanagement  on  a  large  scale. 
After  many  years  of  operation  by  the  city,  the  plant  had  so 
deteriorated  and  the  financial  losses  to  the  city  had  so  accumu- 
lated, the  gas  supplied  was  so  poor  in  quality  and  high  in  price, 
and  the  political  manipulations  of  the  "gas  ring"  (which  Pro- 
fessor Bryce  says  controlled  20,000  votes)  became  so  notorious, 
that  after  a  thorough  legislative  investigation  the  whole  outfit 
was  leased  to  a  private  corporation  for  a  term  of  practically 
thirty  years,  or  from  December  i,  1897,  to  December  31,  1927. 
The  conditions  of  the  lease  provided  for  a  complete  rehabilita- 
tion of  the  plant,  declining  price  and  improved  quality  of  gas, 
and  liberal  annual  cash  payments  into  the  city  treasury. 

In  the  four  years  previous  to  the  making  of  this  lease  the 
expenditures  incurred  by  the  city  in  connection  with  operating 
the  gas  plant,  including  salaries  of  office  employees,  furnishing 
of  street  lamps,  rentals,  betterments,  etc.,  exceeded  the  income 
by  $958,615.64,  an  average  deficit  of  $239,653.91  per  year. 
The  item  of  betterments  during  this  period  averaged  $365,- 
498.02  per  year.  In  view  of  the  condition  the  plant  was  in  when 
taken  over  by  the  private  company,  it  is  a  fair  inference  that 
the  bulk  of  these  so-called  "betterments"  were  virtually  waste, 
yielding  very  little  actual  improvement  in  the  efficiency  of  the 
works.  But  if  we  waive  that  point,  and  credit  the  full  amount 
of  the  betterments  to  the  city  as  permanent  improvement  of  the 
plant,  the  current  operating  account,  disregarding  the  betterments 
outgo,  showed  an  average  annual  surplus  of  $125,844.11.  In  the 
six  years  after  the  lease  the  cash  payments  to  the  city  by  the 
private  company,  in  consideration  of  the  privileges  granted  it, 
amounted  to  $2,600,523.12,  or  an  average  of  $433,420.52  per 
year.  Thus  the  gain  to  the  city  on  current  operating  account 
alone,  under  the  lease,  has  amounted  to  an  average  of  $307,576.- 
41  annually,  as  compared  with  the  four  previous  years.  The 
private  company  now  makes  all  the  betterments  (which  go  to  the 
city  free  and  clear  at  the  end  of  the  lease),  and  these  must  a- 
mount  to  $15,000,000  during  the  term  of  the  lease,  or  an  average 
of  $500,000  per  year.  Adding  to  these  guaranteed  betterments 
the  net  gain  on  current  operating  account,  it  would  appear  that 


210  SELECTED   ARTICLES 

the  average  annual  gain  to  the  city  since  the  lease  went  into  ef- 
fect has  amounted  to  $807,576.41. 

As  a  matter  of  fact,  the  company  is  making  the  bulk  of  the 
betterments  in  the  first  years  of  the  lease.  By  the  first  of  Jan- 
uary, 1904,  it  had  expended  on  this  account  a  total  of  $9,608,199.- 
50. 

And  this  does  not  tell  the  entire  story.  The  company  fur- 
nishes the  city  with  gas  for  street-lamps  and  public  buildings, 
free  01  expense,  and  is  required  to  increase  the  number  of  street- 
lamps  to  the  extent  of  300  per  year,  as  ordered  by  the  City 
Council.  At  the  same  time,  the  average  candle-power  of  the 
light  supplied  has  increased  from  a  range  of  from  19.04  toi9.47 
in  the  four  years  preceding  the  lease,  to  a  range  of  from  22.72  to^ 
23  in  the  six  years  after  the  lease.  The  price  per  1,000  feet  is 
$1,  of  which  10  cents  goes  to  the  city  treasury.  The  city  has  the 
power  to  reduce  the  price  to  90  cents,  if  it  chooses  to  forego 
its  own  revenue  of  10  cents ;  after  1907  it  may  reduce  the  rate  to 
85  cents;  after  1912,  to  80  cents;  and  after  1917,  until  the  end 
of  the  lease,  to  75  cents. 

In  addition,  the  item  of  making  service  connection  and 
installing  meters,  part  of  which  was  formerly  charged  to  the  con- 
sumers, is  now  borne  entirely  by  the  private  company.  The  city 
has  the  option  of  resuming  possession  of  the  plant  January  i, 
1908,  but  only  upon  condition  of  reimbursing  the  private  com- 
pany for  all  betterments  made  in  the  meantime.  At  the  expiration 
of  the  lease  the  entire  plant  is  to  be  turned  over  to  the  city,  with 
all  the  betterments,  free  and  clear.  The  issue  of  returning  to 
city  management  or  executing  a  new  lease  will  then  come  before 
the  city  of  Philadelphia,  and  if  those  who  endured  the  service  as 
it  was  before  1898  were  to  be  the  ones  to  do  the  deciding  in 
1927,  there  is  little  doubt  what  the  verdict  would  be. 

The  experience  of  Boston  a  few  years  ago  throws  additional 
light  on  the  difficulties  of  municipal  ownership  in  this  country. 
Under  Mayor  Quincy,  a  number  of  new  municipal  bureaus  or 
departments  were  created,  through  which  the  city  undertook  to 
do  its  own  printing,  electrical  construction,  carpentering,  and 
repairing,  furnish  its  own  ice,  and  so  on.  Under  the  succeeding 
administration  of  Mayor  Hart,  an  experienced  business  man,  it 


MUNICIPAL    OWNERSHIP  211 

was  found  that,  instead  of  proving  sources  of  economy,  these 
bureaus  were  veritable  waste-pipes  leading  from  the  city  treas- 
ury, and  they  were  closed  up  as  fast  as  possible,  with  the  excep- 
tion of  the  printing-plant,  for  which  a  satisfactory  offer  could 
not  be  obtained.  Among  other  things,  it  was  found,  for  example, 
that  the  electrical  equipment  of  a  ferry-boat,  which  under  private 
contract  would  have  cost  only  $6,800,  cost  $10,200.  Electrical 
work  in  the  city  building  for  hospital  nurses  cost  $4,754 ;  by 
private  contract  it  would  have  been  $1,528.  Work  on  a  city 
armory,  which  normally  would  have  cost  $2,600,  absorbed  $6,700 
of  the  city's  funds.  Ice  for  public  drinking-fountains,  which 
private  companies  were  furnishing  at  $2  to  $3  per  ton,  was 
costing  the  city  $6. 

Political  appointees,  numerically  far  in  excess  of  the  require- 
ments of  the  service,  and  individually  incompetent  as  a  rule,  had 
brought  the  bureaus  to  this  extravagant  pass ;  and  it  was  vir- 
tually impossible  to  resist  the  drift  in  this  direction,  because  the 
Common  Council  would  not  vote  money  enough  to  carry  on  the 
work  of  the  departments,  unless  "places"  were  made  for  the 
favorites  of  the  aldermen,  as  demanded.  Chief  Electrician  Wil- 
liam Brophy,  of  the  Boston  Wire  Department,  reported  to  IMayor 

Hart: 

A  glance  at  the  pay-rolls  shows  that  nearly  60  per  cent,  of  the 
men  whose  nam'es  they  contain  were  appointed  at  the  request  of 
certain  prominent  gentlemen,  who,  to  say  the  least,  are  not  the 
best  judges  of  the  necessary  qualifications  of  the  employees  of  this 
department. 

And  among  these  employees,  it  is  hardly  necessary  to  add,  there 
was  a  more  or  less  general  adoption  of  that  leisurely  gait 
which  already  has  come  to  be  known  on  the  state-managed  in- 
dustries in  New  Zealand  as  the  "government  stroke." 

Civil-service  regulations  proved  no  safeguard  against  these 
aldermanic  raids,  and  the  efforts  to  get  around  the  rules  were 
even  carried  to  the  extent  of  supplying  a  variety  of  ordinary  em- 
ployments with  new  and  singular  names  for  which  no  civil-serv- 
ice examinations  existed ! 

On  the  general  question  of  whether  such  abuses  could  be 
overcome,  and  a  civil-service  system  devised  which  would  pro- 
vide a  really  satisfactory  selection  of  employees  for  socialistic 
municipal   enterprises,    it    seems   high   time   to    remark   that   the 


212 


SELECTED    ARTICLES 


extent  of  effectiveness  of  any  civil-service  test,  v^^here  more  than 
somewhat  perfunctory  service  is  required,  is  very  easily  over- 
estimated. It  has  become  a  sort  of  fetich  in  the  popular  mind, 
to  such  an  extent  that  very  many  participants  in  this  line  of 
discussion  have  made  the  tacit  admission  that  if  a  rigid  civil-serv- 
ice system  could  be  established,  it  might  then  be  a  feasible  to 
place  industrial  enterprises  under  the  management  of  govern- 
ment bureaus.  But  the  truth  is  that  no  civil-service  examination 
ever  devised  is  adequate  to  select  out  industrial  capacity,  or  catch 
in  its  meshes  that  indefinable,  unclassified,  evasive  quality  of 
practical  genius  which  enables  one  man  to  take  charge  of  a 
business  undertaking  and  bring  it  through  to  success,  while  an- 
other, of  equal  or  even  superior  technical  knowledge,  makes  a 
total  failure  of  the  attempt. 

Natural  selection  is  the  only  method  that  has  ever  been 
found  to  develop  the  highest  type  of  managing  ability  in  the  in- 
dustrial field,  and  no  feasible  substitute  for  it  has  ever  been 
proposed.  How  would  it  be  possible,  for  example,  to  establish 
tests  of  business  policy  and  management  which  should  be  re- 
garded as  the  accepted  "standards"?  There  are,  in  fact,  no  ac- 
cepted "standards"  of  policy  for  the  successful  conduct  of  busi- 
ness enterprises.  The  conditions  of  success  are  not  only  con- 
stantly changing,  but  they  are  widely  different  at  one  and  the 
same  time,  in  different  plants,  according  to  the  situation,  charac- 
ter of  the  market,  previous  traditions  of  the  business,  and  a  hun- 
dred and  one  features  irreducible  to  concreteness.  What  might 
be  regarded  as  essential  business  principles  in  one  situation,  and 
made  the  basis  of  a  general  competitive  examination,  might 
yield  a  group  of  successful  candidates  notably  unfit  to  conduct 
enterprises  under  the  varied  and  changing  conditions  of  other 
situations  not  covered  by  these  established  tests.  On  the  other 
hand,  it  is  doubtful  if  some  of  the  most  successful  managers 
of  modern  industries  could  themselves  pass  an  examination  of 
the  sort  which  would  probably  be  regarded  as  necessary  to  select 
the  best  managing  talent. 

To  bring  all  these  considerations  to  bear  against  the  municipal 
operation  of  complex  industrial  enterprises  is  not,  however,  to 
concede  the  entire  case  to  the  opposite  contention  of  unlimited 


MUNICIPAL   OWNERSHIP  213 

private  control.  There  are  grave  abuses  and  inadequacies  in 
private  management,  here  and  there,  as  well  as  under  public 
enterprise,  although  usually  of  a  different  character,  and  capable 
of  being  remedied  by  other  means  than  sacrificing  the  positive 
advantages  and  permanent  incentives  to  efficiency  and  improve- 
ment, furnished  by  the  element  of  individual  rewards  and  penal- 
ties. In  other  words,  there  is  a  middle  ground  of  public  control, 
to  which  attention  may  well  be  drawn,  since  here,  indeed,  is  a 
really  fruitful  field. 

The  transportation  system  of  Boston  was  selected  for  com- 
parison with  Glasgow  intentionally,  because  it  affords  the  best 
illustration  in  evidence  anywhere  of  this  attempt  to  solve  the 
municipal-service  problem  along  the  lines  of  public  control.  The 
public  control  here  exercised  is  both  specific  and  general :  that 
is,  the  Boston  Elevated  Co.  operates  under  certain  restraints  and 
requirements  imposed  equally  upon  all  street-railway  corpora- 
tions in  the  commonwealth,  and  in  addition  is  subject  to  an  com- 
prehensive set  of  special  regulations  framed  in  recognition  of 
the  peculiar  conditions  of  metropolitan  transportation. 

In  addition  to  the  various  taxes  already  specified,  whereby 
the  public  receives  its  contribution  to  the  "Common  Good,"  it  is 
provided  that,  if  any  dividends  are  declared  in  excess  of  6  per 
cent.,  an  amount  equal  to  the  excess  shall  be  divided  among  the 
cities  and  towns  in  which  the  company  operates.  In  point  of 
fact,  whatever  has  been  earned  in  excess  of  6  per  cent,  thus  far 
has  been  turned  back  into  improvement  and  extension  of  the 
system,  and  this  may  be  expected  to  continue  for  a  number  of 
years ;  the  plans  for  development  of  the  Boston  transportation 
facilities  are  of  a  most  comprehensive  character,  and  the  work 
is  steadily  in  progress.  The  division  of  profits  above  6  per  cent. 
(8  per  cent,  in  the  case  of  all  other  street-railway  companies) 
is  probably  the  least  important  of  the  Massachusetts  public- 
control  features ;  it  may  possibly,  however,  act  as  some  measure 
of  protection  of  the  Boston  system  and  its  present  exceptionally 
public-spirited  management,  against  becoming  the  prey  of  specu- 
lative interests  ambitious  to  exploit  the  property  solely  for  the 
quick  profits  to  be  got  out  of.it. 

The  general  body  of  Massachusetts  street-railway  legislation 


214  SELECTED    ARTICLES 

is  very  largely  the  outgrowth  of  an  official  investigation  in  1897, 
by  a  special  committee,  whose  report  is  perhaps  the  most  valua- 
ble and  suggestive  that  has  appeared  on  the  subject.  This  legis- 
lation is  of  an  advanced  character,  providing  very  careful  pro- 
tection of  public  interests  and  close  supervision  of  quasi-public 
enterprises.  As  a  matter  of  fact,  for  more  than  half  a  century 
Massachusetts  communities  have  held  the  power  of  life  and 
death  over  street  railway  corporations,  at  short  notice.  The 
franchibcs  of  any  such  company  are  nominally  perpetual,  but 
they  are  subject  to  revocation  at  will  in  and  by  the  communities 
through  which  its  lines  pass,  the  only  appeal  being  to  the  State 
Railroad  Commission.  The  commission  may  nullify  the  revoca- 
tion, or  sustain  it  if  in  its  judgment  the  public  interests  so  re- 
quire, what  ever  the  cause  of  complaint  against  the  offending 
corporation. 

In  other  words,  a  street-railway  franchise  in  Massachusetts 
is  what  the  investigating  committee  of  1897  termed  a  "tenure 
during  good  behavior;"  the  sole  exception  to  this  indefinite- 
term  principle  being  in  the  case  of  the  Boston  Elevated  Railway. 
In  view  of  the  extraordinary  investment  required  for  per- 
manent plant,  the  Boston  corporation  holds  perpetual  franchises 
for  the  right  of  way  of  its  elevated  structures,  subject  only  to 
revocation  of  its  charter;  and,  by  virtue  of  taking  over  the 
West  End  Street  Railway,  the  Elveated  Co.  operates  under  a 
twenty-year  lease  of  the  subway,  originally  granted  to  the  for- 
mer corporation.  The  surface-line  franchises,  however,  are  re- 
vocable by  the  municipal  authorities. 

The  State  Railroad  Commission  is  not  only  the  final  arbiter 
of  life  and  death  for  street-railway  companies,  but  it  determines 
in  the  first  instance,  by  careful  inspection  of  the  proposed  routes, 
plans,  etc.,  whether  the  capital  stock  to  be  issued  corresponds 
with  a  fair  estimate  of  the  actual  expense  of  construction  to  be 
incurred;  and  no  corporation  may  issue  stock  in  excess  of  that 
decision.  All  increases  of  stock  must  be  authorized,  and  the 
price  per  share  at  which  it  may  be  sold  to  those  already  owning 
stock  must  be  fixed,  by  the  commission.  The  price  so  fixed  must 
represent  as  nearly  as  possible  the  market  value  of  the  stock  at 
the  time.    No  certificate  of  original  stock  may  be  issued  until  the 


MUNICIPAL   OWNERSHIP  215 

par  value  thereof  has  been  paid  in,  in  cash  :  and  no  stock  or  scrip 
dividends  may  be  declared,  or  proceeds  from  the  sale  of  stock 
divided  among  the  stockholders ;  these  restrictions  apply  to  all 
public-service  corporations.  Bonds  may  not  be  issued  by  street- 
railway  companies  until  the  Railroad  Commission  is  satis- 
fied that  the  value  of  the  real  and  personal  property  of  the 
company  for  railroad  purposes  exclusive  of  the  value  of  the 
franchises,  equals  or  exceeds  the  amount  of  capital  stock  and 
debt.  These  provisions  render  stock-watering  virtually  impos- 
sible. 

The  railroad  commissioners,  also,  may  nullify  at  their  dis- 
cretion any  location  granted  through  a  street  for  a  new  street 
railway  or  extension  of  an  old  one.  in  case  a  majority  in  value 
of  the  owners  of  real  estate  on  that  street,  or  ten  such  owners, 
appeal  to  the  commission  within  thirty  days  after  the  location 
is  granted.  Even  after  the  work  of  construction  is  completed, 
operation  may  not  begin  until  the  commissioners  have  certified 
that  the  laws  relative  to  its  construction  have  been  complied  with, 
and  the  board's  engineer  has  inspected  the  line  in  detail  and 
found  everything  safe  and  adequate.  Thereafter  the  commission 
may  revise  or  alter  any  regulations  of  a  street-railway  company 
for  the  use  of  its  road  or  cars ;  may  determine  how  and  to  what 
extent  cars  shall  be  heated :  and  the  companies  forfeit  $25  for 
each  trip  upon  which  the  cars  are  not  so  heated,  unless  the 
failure  is  due  to  an  accident  to  the  heating  apparatus.  The 
district  police  are  required  to  enforce  this  provision.  If  the 
commission  considers  that  additional  accommodations  are  re- 
quired, after  due  notice  to  the  company  it  may  order  such  ad- 
ditional accommodations,  and  after  one  week  from  the  service 
of  such  notice,  if  the  company  neglects  to  provide  them,  it  for- 
feits $100  for  each  day  of  such  neglect. 

Transfer  privileges  may  not  be  withdrawn  except  upon 
approval  of  the  Board  of  Railroad  Commissioners.  The  books 
of  every  railroad  corporation  must  be  kept  in  a  uniform  mamner, 
upon  a  system  prescribed  by  the  commission,  the  accounts  exam- 
ined from  time  to  time,  and  the  results  made  public  as  the  com- 
mission may  consider  expedient.  Such  examination  and  publica- 
tion of  results  may  be  compelled  at  any  time  by  application  of 


2i6  SELECTED    ARTICLES 

any  persons  owning  one-fiftieth  of  the  paid-in  stock  of  the  cor- 
poration, or  bonds  or  other  evidences  of  indebtedness  equal  in 
amount  to  one-fiftieth  or  such  stock — an  important  provision  in 
protection  of  the  minority  stockholder,  creditor,  or  bond-holder. 
A  five-thousand-dollar  fine  is  the  penalty  for  refusal  or  neglect 
of  any  such  corporation  to  exhibit  its  books  and  accounts  when- 
ever the  commission  requires. 

These  are  only  illustrations  of  the  far-reaching  supervision 
exercised  by  the  Massachusetts  Railroad  Commission.  No  other 
in  the  country  is  endowed  with  powers  so  sweeping;  no  other 
stands  so  high  in  reputation  for  ability,  fairness,  and  unimpeach- 
able honesty.  Only  because  its  extraordinary  authority  is  never 
abused  is  it  possible  to  continue  that  authority  in  active  exercise. 
The  commission  is  securely  intrenched  in  the  respect  and  con- 
fidence of  all  elements  in  the  community;  so  much  so  that  it  has 
become  in  many  cases  a  custom  of  opposing  interests,  corporate 
and  otherwise,  to  refer  controversies  to  it  for  decision ;  and, 
although  the  decision  is  often  adverse  to  the  corporation  inter- 
ests, sometimes  to  the  extent  of  important  and  expensive  changes 
in  plant  or  equipment  or  method  of  operation,  the  commisssion 
still  remains  the  preferred  tribunal. 

The  general  attitude  of  the  present  commission  toward  the 
street-railway  problem  is  admirably  summed  up  in  a  paragraph 
of  its  recent  decision  in  the  Springfield  case,  referred  to.     The 

commissioners   say: 

The  operation  of  street  railways  in  the  larger  municipalities  has 
shown  that  the  traffic  within  city  limits  can  be  handled  with  great- 
er success  and  greater  safety  by  one  than  by  several  com- 
panies. It  will  not  do,  however,  for  a  company  which  receives  the 
privileges  of  monopoly  to  forget  the  obligations  which  go  with 
them.  The  public  in  such  case  can  look  to  the  one  company  only 
for  needful  extensions  and  additional  accommodations.  In  response 
such  company  should  be  quick  to  meet  all  reasonable  demands. 
When  it  undertakes  to  perform  the  entire  public  service,  it  must 
carry  out  the  task. 

The  Massachusetts  Commission  consists  of  three  men, 
appointed  by  the  governor  with  the  consent  of  the  special  ad- 
visory body  known  as  the  "Council,"  and  each  holds  ofifice  for 
three  years.  Its  integrity  is  preserved  through  two  consider- 
ations :  the  virtual  absence  of  attempts  on  the  part  of  Mas- 
sachusetts corporations  to  control  it  by  influencing  the  election 
of  a  "friendly"  governor,  and  the  positive  demand  of  public  senti- 


MUNICIPAL   OWNERSHIP  217 

ment  for  a  commission  that  shall  be  above  criticism.  To  appoint 
to  this  commission  a  man  open  to  suspicion  of  representing 
special  interests  would  be  hardly  less  disastrous  to  the  future 
political  prospects  of  a  public  official  than  an  attempt  to  "pack" 
the  Supreme  Court  with  political  or  corporate  favorites. 

It  might  be  expected  from  all  too  familiar  experience  else- 
where that  the  power  of  revoking  franchises  would  be  in  constant 
use  as  a  club  for  blackmail  extortion ;  and  with  a  less  active 
public  conscience  than  still  prevails,  for  the  most  part,  in  Massa- 
chusetts, it  probably  would  be.  But  in  the  Bay  State  a  liberally 
managed,  law-abiding  corporation  is  practically  as  sure  of  fair 
treatment  and  a  long  lease  of  life  as  if  its  franchises  were  ab- 
solute for  twehty,  thirty,  or  fifty  years.  In  fact,  the  half -century 
of  experience  with  revocable  franchises  was  so  satisfactory  to  all 
concerned  that  in  all  the  hearings  before  the  investigating  com- 
mittee of  1897  no  request  to  change  this  feature  was  made  by  any 
municipality  or  corporation  in  the  state. 

Other  public-service  corporations  are  likewise  under  strict 
provisions  of  public  control.  Gas  and  electric-light  companies 
are  under  the  supervision  of  the  State  Board  of  Gas  and  Electric 
Light  Commissioners,  who  have  the  power  of  examining  accounts, 
etc.  Telephone  and  telegraph  corporations,  and  water  companies, 
are  under  the  state  commissioner  of  corporations,  who  is  also  the 
commissioner  of  taxes.  All  issues  of  stock  or  bonds  of  any 
such  corporations  must  be  approved  by  these  commissioners  re- 
spectively, as  the  case  may  be,  and  must  be  on  the  basis  that  the 
amount  is  "reasonably  necessary  for  the  purpose  for  which  such 
issue  of  stock  or  bonds  has  been  authorized."  Whenever  the 
mayor  of  a  city  or  selectmen  of  a  town,  or  twenty  customers, 
complain  as  to  the  price  or  quality  of  gas  or  electric  light  fur- 
nished, the  Board  of  Gas  and  Electric  Light  Commissioners  must 
notify  the  corporation  and  order  a  public  hearing,  and  after  the 
hearing  may  order  such  reduction  of  price  or  improvement  in 
quality  as  the  facts  brought  out  may  warrant.  The  price  so 
fixed  may  not  be  increased,  except  that  any  corporation  may 
apply  for  a  new  hearing,  if  it  considers  itself  aggrieved. 

The  annual  expenses  of  the  Board  of  Railroad  Commissioners 
and  the   Board   of   Gas   and   Electric   Light   Commissioners   are 


2i8  SELECTED  ARTICLES 

charged  upon  the  various  railroad  and  gas  and  electric-light  cor- 
porations, respectively,  in  proportion  to  their  gross  earnings. 

All  corporations  in  Massachusetts,  of  whatever  kind,  are 
subject  to  state  taxation  upon  the  value  of  their  "franchises," 
representing  the  right  to  do  business — an  express  assertion  of 
the  principle  that  the  carrying  on  of  an  industrial  enterprise  is  a 
social  privilege  rather  than  a  fundamental  or  natural  individual 
right.  The  value  of  the  franchise  is  determined  by  the  state  tax 
commissioner,  and  is  arrived  at  by  taking  the  total  market  value 
of  the  stock  of  the  corporation  at  the  time  of  the  assessment, 
and  making  certain  deductions  therefrom,  as  follows :  In  the  case 
of  a  telegraph  or  railroad  or  street-railway  company,  the  value 
of  its  real  estate  and  machinery  subject  to  local  taxation  within 
the  commonwealth  is  deducted;  also  so  much  of  the  value  of 
its  stock  as  is  proportional  to  the  length  of  its  lines  lying  out- 
side the  state.  In  the  case  of  telephone  companies,  the  value 
of  the  real  estate  and  plant  subject  to  local  taxation  within  the 
state  is  deducted ;  also  the  value  of  all  stock  of  other  corpor- 
ations held  by  a  "domestic"^  telephone  company,  and  upon  which 
a  tax  has  been  paid  in  Massachusetts  or  any  other  state  for  the 
preceding  year ;  and  so  much  of  the  value  of  the  stock  of  a 
"foreign"!  telephone  company  as  is  proportional  to  the  number 
of  telephones  it  owns  or  controls  outside  the  state.  In  the  case 
of  all  other  corporations,  manufacturing,  etc.,  the  value  of  real 
estate  and  machinery  subject  to  local  taxation  is  deducted.  And 
it  should  be  noted  that  the  assessments  for  local  taxation  of 
corporations  are  subject  to  equalization  or  alteration  upon  pro- 
ceedings which  the  state  tax  commissioner  has  power  to  compel. 

The  differences  between  the  total  market  value  of  the  stock 
and  the  various  deductions  specified  is  considered  to  represent 
the  value  of  the  franchise,  and  this  is  taxed  at  the  same  rate  as 
that  ascertained  for  the  general  state  property  tax  in  any  given 
year. 

That  a  system  of  public  espionage  and  control  so  thorough- 
going and  rigid  as  this  should  have  given  satisfactory  results, 
on  the  whole,  and  without  serious  abuses,  is   a  tribute  to  the 

,     1  "Domestic"    corporation    organized    under   Massachusets    laws; 
foreign"  under  laws  of  some  other  state. 


MUNICIPAL   OWNERSHIP  219 

relatively  high  standards  of  civic  life  and  general  political  con- 
ditions maintained — not  without  exceptions,  to  be  sure — in  the 
commonv^-ealth,  and  it  would  take  considerable  optimism  to  as- 
sume that  similar  regulations  would  work  equally  well  every- 
where— or  even  anywhere — else  in  the  Union.  The  city  of  Bos- 
ton is  the  danger  spot,  and  source  of  constant  menace  to  the  just 
exercise  of  these  extraordinary  powers  over  corporate  property; 
and  many  times  there  has  been  occasion  to  realize  how  narrow  is 
the  margin  of  safe  control  in  the  hands  of  decent  elements, 
which  prevents  the  legislative  system  from  being  converted  into 
a  weapon  of  plunder  in  the  hands  of  professional  blackmailers 
and  "grafters." 

However,  if  Massachusetts  has  to  fight  at  every  step  for  the 
integrity  of  her  public-control  policies,  where  shall  be  found  the 
justification  for  other  and  less  favored  communities  rushing 
away  beyond  these  limits  to  the  extreme  experiment  of  public 
ownership  and  operation?  If  an  effective  system  of  regulation 
cannot  be  maintained  in  our  large  cities,  because  of  political  cor- 
ruption, what  hope  is  there  for  the  success  of  absorption  out- 
right, placing  public-service  facilities  wholly  in  the  hands  of  the 
selfsame  political  influences? 

Public  control  retains  the  vital  spark  of  individual  enterprise 
and  the  incentive  of  private  reward,  which  have  kept  alive  the 
spirit  of  industrial  progress  and  brought  nearly  all  the  material 
gains  of  civilization  into  being;  and  at  the  same  time  asserts  in 
practical  form  the  right  of  the  whole  community  to  hold  self- 
interests  within  just  bounds  and  guarantee  to  itself  such  benefits 
as  its  own  contribution  to  the  success  of  the  enterprises  entitles 
it  to  demand.  There  is  "hard  Yankee  sense"  in  such  a  program. 
It  does  not  violate  the  American  idea  of  individual  achievement. 
It  has  shown  itself  practicable  under  at  least  some  American 
conditions.  But  the  first  task  of  the  municipal  reformer  is  to 
bring  the  general  civic  conditions  themselves  to  some  permanent 
and  dependable  plane  of  honesty,  public  spirit,  and  cleanness. 
If  public  control  cannot  succeed  on  any  lower  level  than  this,  what 
would  happen  to  public  ownership? 


ADDITIONAL  REPRINTS 

Calgary,    Alberta,    Canada.     City    Clerk.     Municipal    Manual, 

1913-  pp.  46-9. 

Municipally-Owned    Industrial    Sites. 

Chief  among  the  inducements  Calgary  offers  to  manu- 
facturers are  the  industrial  sites  owned  by  the  city.  These 
are  located  in  various  parts  of  the  city  and  were  purchased 
some  two  years  back,  to  provide  for  the  rapid  industrial  de- 
velopment, which  was  then  and  is  still  taking  place  in  the 
City    o:    Calgary. 

"Manchester,"'  immediately  within  the  southern  limits  ot 
the  city  and  situated  on  the  Calgary-Lethbridge  branch  of 
the  C.  P.  R..  is  offered  manufacturers  desirous  of  locating 
in  Calgary,  on  the  following  terms: — 

1.  Cost  price  $1,200  per  acre;  one-third  cash,  the  balance 
in  equal  instalments  divided  over  a  term  agreeable  to  the 
purchaser,  up  to  six  years,  with  interest  at  6  per  cent.,  pay- 
able  annually. 

2.  (a)  The  purchaser  or  purchasers  must  agree  that  all 
buildings  erected  on  land  bought  by  them  shall  conform  to 
the  requirements  of  the  second-class  fire  limits   of  the   city. 

2.  (b)  To  use  the  land  for  10  years  from  the  date  of 
purchase  for  manufacturing  purposes  only,  and  after  10  years 
for  the  same  purpose  until  otherwise  allowed  by  by-law  of 
the  City  of  Calgary. 

2.  (c)  To  begin  building  operations  on  the  land  purchased 
within  six  months  from  the  date  of  purchase  and  to  complete 
the  buildings  within  a  reasonable  time,  and  if  the  purchaser 
or  purchasers  fail  to  carry  out  this  provision  the  agreement 
shall  be  void  and  the  land  revert  to  the  city. 

2.  (d)  That  he  or  they  shall  not  assign  or  sublet  without 
the  consent  of  the  Council  of  the  City  of  Calgary. 


222  SELECTED    ARTICLES 

2.  (e)  To  pay  the  City  of  Calgary  its  proportionate  share 
of  the  rental  of  the  main  spur  or  spurs  constructed  to  serve 
the  subdivision. 

Street  cars,  sewer,  water  and  electric  light  are  extended 
to  and  in  use  in  "Alanchester."  This  property  is  approxi- 
mately two  and  one-half  miles  from  the  postoffice.  Appli- 
cations for  sites  in  this  property  should  be  made  to  the  Rail- 
ways and  New  Industries  Committee  of  the  City  Council, 
and  addressed  in  care  of  the  QA\.y  Clerk. 

Two  miles  east  of  the  city  limits  and  about  five  miles 
from  the  postoffice,  lies  another  tract  of  land  owned  by  the 
city,  for  use  as  industrial  sites.  This  property  is  served  by 
the  C.  N.  R.  and  the  G.  T.  P.  railroads.  The  Alberta  Interur- 
ban  Railway  proposes  to  erect  their  shops  on  this  property. 
The  city  holds  an  agreement  with  the  vendors  from  whom 
this  site  was  purchased,  whereby  the  vendors  agree  to  hold 
the  east  half  of  those  blocks  lying  east  of  the  city  property, 
up  to  November,  1914,  for  working  men's  home  sites,  to  be 
sold  to  industrial  or  manufacturing  concerns  locating  on  this 
property  at  not  more  than  $100.00  per  25  foot  lot  and  to  be 
used  for  the  purpose  above  mentioned. 

The  city  also  owns  several  blocks  of  land  in  the  subdi- 
vision known  as   Calgary  Junction. 

Another  site  owned  b}'-  the  city  within  easy  reach  of  the 
business  districts  of  Calgary,  lies  about  two  miles  northeast 
of  the  postoffice.  The  Calgar3'--Edmonton  branch  of  the 
C.  P.  R.  runs  through  this  property. 

The  three  sites  last  mentioned  have  not  yet  been  placed 
on  the  market,  but  when  there  is  a  demand  for  them  they 
will  most  probably  be  offered  at  the  same  advantageous 
terms  as  are  in  force  in  "Manchester." 

Industrial  sites  will  be  sold  only  to  bona  fide  manufactur- 
ers  fulfilling   the   above-mentioned   terms. 

The  city  has  power  to  limit  the  assessment  on  land  used 
for  manufacturing  purposes  to  $3,000.00  per  acre  up  to  date 
of  January  i,  1918,  and  to  $5,000.00  per  acre  until  January  i, 
1923,  and  to  exempt  from  taxation  buildings,  improvements, 
machinery  and  stock  being  used  on  said  land,  subject  to  a 


MUNICIPAL  OWNERSHIP  223 

by-law  providing  for  such  exemption  being  ratified  by  the 
people  as  in  the  case  of  a  money  by-law. 

The  above  clause  does  not  mean  that  the  industrial  con- 
cerns are  exempt  from  local  improvement  taxation. 

If  the  aforesaid  land,  buildings,  stock  or  improvements 
cease  to  be  used  or  occupied  for  the  purposes  aforemen- 
tioned, such  land,  etc.,  so  ceasing  to  be  used  or  occupied 
shall  be  liable  to  taxation  in  the  usual  manner. 

Calgary,    Alberta,    Canada.     City    Clerk.     Municipal    Manual, 

.  1913.  pp.  83-4. 

i\Iunicipal  Asphalt  Paving  Plant. 

The  asphalt  paving  plant  which  is  owned  and  operated  by 
the  Cit}^  of  Calgary,  is  situated  on  the  banks  of  the  Bow 
River,  just  west  of  jMewata  Park. 

The  plant,  when  in  operation,  is  capable  of  constructing 
1500  sq.  yards  per  da}^,  but  this  capacity  will  be  largely  in- 
creased when  the  addition,  which  is  being  made  to  the  pres- 
ent plant,  is  completed. 

The  cost  of  the  paving  plant  up  to  date  of  January  i, 
1913,  was  $49,000.00  but  a  large  sum  is  being  expended  in 
making  an   addition. 

Pavement  is  laid  by  this  plant  at  an  average  cost  of  $2.10 
per  sq.  j^ard.  This  price  includes  an  allowance  for  debenture 
interest,  sinking  fund,  and  depreciation  of  the  plant.  Pav- 
ing laid  for  this  sum  shows  a  great  saving  when  compared 
with  the  price  paid  to  paving  companies  under  contract  with 
the  City. 

The  above-mentioned  plant  has  been  in  operation  since 
July  of  the  year  1912  and  has  proved  an  unqualified  success. 

Calgary,   Alberta,    Canada.     City    Clerk.     Municipal    Manual, 

1913.   pp.   84-97. 

Calgary  Municipal  Street  Railway. 
The   City  of  Calgary,  having  a  population  of  35,000  suc- 
cessfully  launched   an    up-to-date    street   railway   service    on 
July  5,  1909. 


224  SELECTED   ARTICLES 

For  several  years  capitalists  endeavored  to  get  the 
franchise,  claiming  that  it  could  not  be  operated  at  a  profit. 
The  city,  however,  did  not  give  this  away,  but  voted 
$476,000.00  to  build  and  operate  it  as  a  public  utility,  and  al- 
though it  was  not  anticipated  that  more  than  operating  ex- 
penses would  be  received  for  a  few  years,  it  has  been  a  suc- 
cess from  the  start.  Beginning  with  twelve  cars  of  the  most 
modern  type — pay-as-you-enter — it  returned  the  city  interest 
charges  and  a  surplus  of  $10,000.60  for  contingent  account, 
during  its  first  six  months'  operation. 

Cojistruction  was  commenced  September,  1908,  and  one- 
half  mile  of  track  was  laid  that  Fall.  During  the  paving  of 
the  main  street,  on  May  t,  1909,  work  was  again  proceeded 
with,  on  the  arrival  of  rails  and  material.  Twelve  "pay-as- 
3'ou-enter"  cars,  41  ft.  6  in.  long,  were  ordered,  and  the  work 
of  construction  was  pushed  da}^  and  night,  with  a  view  of 
having  a  portion  of  the  system  in  operation  for  the  Alberta 
Fair,  July  5,  which  was  accomplished  by  a  close  margin. 
The  power  generator  arrived  July  t,  and  two  cars  on  July  2. 
The  railway  ofiicialh^  opened  at  8  a.  m.  on  Juh^  5,  with  two 
cars,  operating  from  the  centre  of  the  cit}'  to  the  fair 
grounds,  a  distance  of  about  one-half  mile,  to  the  great  sur- 
prise of  the  citizens  and  the  visitors  generally,  as  it  was  not 
expected  possible  to  carry  out  the  work  in  such  time. 

During  fair  week  35.460  passengers  were  carried  without 
an  accident  or  interruption  of  any  kind,  and  as  this  work 
thereafter  proceeded  and  additional  cars  arrived,  they  were 
added  so  that  by  September  15  twelve  cars  were  in  opera- 
tion, on  sixteen  and  one-half  miles  of  track,  four  miles  of 
which  were  paA'ed. 

This  work  was  carried  on  by  five  paving  contractors  and 
one  track  construction  company,  who  had  the  contract  for 
the  unpaved  section,  the  city  doing  all  special  work,  inter- 
sections and  overhead,  under  the  supervision  of  City  Engi- 
neer Childs  and  Superintendent  McCauley. 

All  materials  and  construction  is  of  the  best;  tubular  steel 
poles  being  used  on  the  paved  sections;  the  pavement,  which 
is  composed  of  granitoid,  wood  block,  bitulithic  and  asphalt; 


MUNICIPAL  OWNERSHIP  225 

the  track  on  such  sections  being  laid  on  a  sub-base  of  four 
inches  of  cement,  with  six-inch  ties  being  spaced  four  feet 
apart,  grouted  in  with  cement,  representing  on  the  granitoid 
pavement  sections  seventeen  inches  of  bed. 

The  rails  are  60  and  80  lb.,  Lorain  6-inch  and  7-inch  sec- 
tion, 60  feet  long,  high  ''T"  bonded  with  double  compressed 
bonds;  all  intersections  are  manganese  steel,  supplied  by  the 
U.  S.  Steel  Company  and  Hadfields,  of  ]\Ianchester. 

Overhead  feeder  wires  are  of  aluminum,  and  all  material 
is  of  the  best  quality,  nothing  being  spared  to  make  the  sys- 
tem permanent   in   every  particular. 

After  a  completion  of  the  work,  as  first  estimated,  a  sur- 
plus was  saved  sufticient  to  purchase  six  additional  cars  46 
feet  6  inches  long,  which  were  received  July  i,  1910,  giving 
an  equipment  of  18  cars.  In  September,  1910,  a  further  by- 
law was  voted  to  extend  the  line  24  miles,  and  purchase  12 
additional  cars  and  equipment,  at  a  cost  of  $484,000.00.  These 
cars  were  received  and  24  miles  of  additional  extensions  con- 
structed in  191 1,  giving  a  total  mileage  of  forty  and  one- 
half  miles  and  thirty  cars. 

A  further  by-law  was  passed  by  the  Council,  to  a  vote  of 
the  ratepayers,  October  3,  191 1,  for  $375,000.00,  to  construct 
twelve  additional  miles  of  track,  purchase  18  cars  (passen- 
ger), one  scenic  car  and  one  sprinkler  car;  add  to  the  car 
barn  and  equip  the  system  with  all  modern  appliances,  which 
has  been  carried  out. 

With  the  decision  of  the  C.  P.  Ry.  to  erect  their  Western 
shops  in  Calgary,  a  further  by-law  was  passed  to  construct 
three  miles  of  line  to  these  shops,  and  to  purchase  complete 
six  46  feet  6  inch  cars,  at  a  cost  of  $82,000.00,  making  the 
equipment  54  passenger,  i  observation  and  2  sprinkler  cars; 
55^  miles  of  track,  with  3^  miles  donated  to  the  city — a 
total  of  59  miles. 

With  this  gift  86  acres  of  a  park  were  also  given,  on  the 
Bow  River,  beautifully  situated,  wooded,  and  also  water  suit- 
able for  boating. 

During  the  year  all  the  line  feeders  within  three-quarters 
of  a  mile  of  the  power  house  plant  have  been  placed  under- 


226  SELECTED   ARTICLES 

ground.  Two  additional  sub-stations  for  light  and  power 
for  the  railway,  are  under  construction,  which  will  increase 
the  railwa}^  power   1,200  k.  w.  hours. 

At  present  power  is  supplied  by  two  500-k.  w.  direct 
driven  steam  units  as  an  auxiliary,  and  one  300-k.  w.  and  one 
1 500-k.  w.  motor  generator,  for  which  power  is  purchased 
from  the  Calgary  Power  and  Transmission  Company  at 
$30.00  per  horsepower. 

The  power  department  is  separately  operated,  supplying 
the  city  with  light  and  power,  and  charges  the  railway  for 
such  power  as  it  uses,  at  2  cents  per  k.  w.  hour. 

Five  classes  of  tickets  are  used:  "School,"  good  to  and 
from  school  for  adults  and  any  time  for  children,  10  for  25 
cents;  "Work,"  good  morning  and  evening,  8  for  25  cents; 
"Ordinary,"  good  any  time,  6  for  25  cents.  "Ordinary,"'  25 
■in  book  form,  $1.00;  and  pads  of  civic  employees'  tickets,  30 
for  $1.00,  the  latter  charged  to  the  departments  in  which 
they  are  used. 

No  passes  are  issued  to  anyone,  but  transfers  are  made 
from  the  different  routes  at  ten  different  points  in  the  city, 
and  a  labour  fare  between  12  and  2  p.  m.  is  being  considered. 

Employees  are  paid  a  sliding  scale,  representing  after 
three  months'  service,  28  cents;  second  six  months,  30  cents 
per  hour;  for  the  second  year,  32  cents  per  hour;  for  the 
third  year,  34  cents,  and  after  thre^  years,  35  cents  per  hour. 

Free  winter  coats,  and  half  cost  of  uniforms  are  granted, 
with  free  uniforms  after  one  year. 

Politics  are  not  permitted  to  enter  into  the  operation  of 
the  system,  the  Superintendent  being  the  sole  judge  of  quali- 
fication necessary,  and  dismissals  are  made  subject  to  em- 
ployees having  the  right  to  appeal  to  a  committee,  composed 
of  the  officers  of  the  Street  Railway  Sick  Benefit  Associa- 
tion, to  arbitrate  with  the  Superintendent  should  any  dispute 
arise. 

The  above  association  was  organized  May  i,  1912,  and 
is  composed  of  all  the  operating  staff  with  proper  officers 
and   constitution. 

The  fees  are:  $2.00  entrance  fee  and  $1.00  per  month  there- 
after, one-half  of  which  is  paid  to  the  association's  treasurer 


MUNICIPAL  OWNERSHIP  227 

by  the  street  railway  department,  leaving  the  members'  fees 
$1.00  entrance  and  50  cents  per  month. 

For  this,  on  a  duly  signed  certificate  from  the  doctor, 
members  receive  $1.50  per  day  during  sickness  after  four 
days,  and  free  private  ward  in  hospital  in  case  of  injuries 
received  in  the  service. 

The  railway  department  also  furnishes  free  club  rooms, 
piano,  pool,  shooting  galleries,  etc.,  where  concerts,  dancing 
and   competitions   are   regularly   held. 

Under  agreement  with  the  railway,  all  employees  agree 
to  become  members,  and  also  if  required,  become  district 
constables,  so  that  they  may  maintain  order  on  the  system  If 
necessary. 

Operated  by  the  City  Commissioners:  Maj-or  J.  W. 
Mitchell,  as  chairman;  A.  G.  Graves  and  S.  J.  Clarke  as 
Commissioners,  with  Superintendent  McCauley  in  charge, 
the  following  results  have  been  showm  up  to  June  30,  1912, 
as   reported   to   the   Minister  of  Railwa^'-s.   in   annual   report: 

BEGAN    OPERATIONS    JULY    5,    1909— TWO    CARS. 

Fi'oui  July  5,  1909,  to  June  30,  1910. 

Revenue     $144,244.18 

Operating   expenses    87,263.36 

Surplus  from  operation   $56,980.82 

Less — 

Interest  on  debentures    $  22,860.00 

Sinking  fund    4,685.29  27,545.29 

Nett  profit    $29,435-53 

Passengers   carried    3*649,697 

Miles    operated     500,622 

Salaries  paid    $46,513.42 

From  July  i,  1910,  to  June  30,  1911. 

Revenue    $275,434.51 

Operating  exoenses    139,601.98 

Surplus  from   operation    $I35>832-S3 


228  SELECTED   ARTICLES 

Less — 

Interest  on   debentures    $  23,220.00 

Sinking  fund    9,370.00 

Contingent    account     5    per    cent. 

gross  revenue    13,771.72 

Taxes     2,264.17  $  48,625.89 

Nett  profit    $  87,206.64 

Passengers   carried    .' 7,176,086 

Miles    operated 801,086 

Salaries    paid    $76,686.85 

From  July  j,   191 1,   to  June  30,  19 12. 

Revenue    $479,240.24 

Operating   expenses    282,600.56 

Surplus   from   operation    $196,639.68 

Less — 

Taxes    $     2,264.18 

Interest  on  debentures 45,000.00 

Sinking    fund     18,160.00 

Contingent    account    5     per    cent. 

gross  revenue    23,962.01  $  89,386.19 

Nett    profit    $107,253.49 

Passengers   carried    12,941,530 

Miles  operated    1,643,328 

Salaries  paid    $172,521.75 

For  Four  Months,  ending  October  31,  1912. 

Revenue    $230,984.25 

Operating   expenses    i39,i59-83 

Surplus  from  operation   $  91,824.42 

Less — 

Interest  on  debentures  and  sinking 

fund    $  25,953.62 

Contingent     account     5     per     cent. 

revenue  1 1,549.19  $  37.502.81 

Nett  profit $54,321.61 


MUNICIPAL  OWNERSHIP  229 

Passengers   carried    5.547,809 

Miles  operated    810,826 

Salaries    paid    $89,160.15 

Calgary  has  grown  during  the  past  three  years  from 
35,000  to  a  population  of  75,000. 

The  above  nett  profits  are  clear  of  all  charges,  coverina' 
operating  expenses,  interest,  sinking  fund,  and  5  per  cent,  of 
the  gross  revenue,  as  a  contingent  fund  provided  to  cover 
accidents  to  the  public  and  the  employees,  and  provide  for 
renewals  and  contingents  of  all  kinds,  not  otherwise  pro- 
vided for. 

The  surplus  in  this  account  for  the  year  ending  June  30, 
191 1,  was  $13,771.72,  which,  added  to  the  sinking  fund  (pro- 
vided for  the  same  period)  of  $9,370.00,  amounts  to  $23,141.72; 
and  from  June  30,  1911,  to  June  30,  1912,  $42,122.01,  or  more 
than  twice  the  amount  set  aside  by  private  corporations  as 
a  renewal  or  contingent  fund. 

The  following  statistics  show  the  growth  of  the  system: 

Cars  operated  July  5,   1909 2 

Cars  operated  July  i,   1910 15 

Cars  operated  July  i,   191 1 22 

Cars  operated  July  i,   1912 48 

Cars  operated  Dec.  31,  1912 54 

Miles  of  Track. 

July  5,  1909   3  Miles 

July  I,  1910  i6y2    " 

July  I,  1911   265^    " 

July  I,  1912 54 

Dec.  31,  1912 59        " 

Employees. 

July    5,1909  16 

July    I,   1910  62 

July    I,    1911  102 

July    I,   1912  246 

Dec.  31,  1912  266 


230  SELECTED   ARTICLES 

Aside  from  the  regular  service,  an  observation  or  "Seeing- 
Calgary"  car  is  operated  over  the  different  routes,  on  hourly- 
trips,  at  a  cost  of  25  cents,  from  which  all  the  principal  parts 
of  the  city  may  be  seen,  and  are  announced.  This  car  cost, 
complete,  $7,500.00. 

This  car  is  the  original  and  only  one  of  its  kind;  46  feet 
long  with  elevated  seats;  bronze  fittings,  bevelled  plate  glass 
mirror  sides,  etc. 

It  has  been  found  a  good  investment,  earning  as  high  as 
$124.00  per  day  of  nine  hours  operation.  Six  additional  46 
feet  6  inch  cars  were  received  from  Preston,  Ontario,  on  Nov. 
25,  making  54  cars,  and  during  1913  large  extensions  are  pro- 
vided for,  including  24  additional  motor  cars,  41  feet  and 
46  feet  long,  and  6  trail  cars,  44  feet  long,  the  latter  of  which 
will  be  operated  to  the  C.  P.  R.  shops  as  train  cars. 

Also  4  work  cars,  i  sprinkler  and  i  large  power  construc- 
tion car,  which  will  give  the  system  78  motor  passenger,  6 
trail,  I  observation,  9  work  or  freight  cars,  3  sprinklers  and 
I  sweeper — or  a  total  of  98  cars  of  all  classes. 

Aside  from  the  above  17  miles  of  additional  track  will  be 
constructed,  and  an  additional  car  barn  and  its  equipment 
added,  all  at  a  cost  of  $500,000.00,  which  will  place  the  capital 
expenditure,  including  paving  costs,  at  $2,300,000.00 

As  the  railway  purchases  power  froth  the  City  Power  De- 
partment, that  department  furnishes  the  necessary  plant, 
which  is  being  increased  by  three  sub-stations,  and  the  ad- 
dition of  2,100  horsepower. 

Of  the  59  miles  of  track  now  constructed,  26  miles  is 
permanent  work  on  paved  streets,  and  it  is  expected  in  1913 
to  pave  an  additional  9  miles;  therefore  it  is  clearly  shown 
that  Calgary  in  operating  its  municipal  railways  is  doing  so 
on  a  sound  and  business  basis,  and  controls  its  own  streets 
without  dictation  by  any  monopoly,  and  conserving  the 
profits,  which  for  the  year  1912  will  amount  to  over 
$100,000.00,  for  the  reduction  of  taxes  and  local  improvement, 
besides  operating  two  5,000-gallon  electric  car  sprinklers 
over   the   streets   covered  by   the   railway,   without   charge. 


MUNICIPAL  OWNERSHIP  231 

Regina,   Saskatchewan,   Canada.    City   Clerk.    Municipal 

Manual,  1913.  pp.  40-3. 

Electric    Light   and    Power    Plant. 

The  Electric  Light  and  Power  System  is  owned  and 
operated  by  the  City.  This  utility  is  not  only  self-sustaining, 
but  revenue  producing,  showing  a  surplus  of  revenue  over 
expenditure  of  $102,000  in  1912.  The  generating  plant  con- 
sists of: 

6  boilers,  aggregating  2,000  h.  p. 

I   100  kw.  Ideal  Engine  type  generating  unit. 

I  450  kw.  low  pressure  Turbine  generating  unit. 

1  1,500  kw.  high  pressure  type  generating  unit. 

2  400    kw.    direct    current    railway    units,    vertical    engine 
type. 

Some  300  arc  and  50  incandescent  street  lights  are  in  use, 
and  provision  has  been  made  for  the  installation  of  300  ad- 
ditional arc  lights  during  the  year  1913.  Provision  is  made 
in  the  capital  estimates  for  1913  for  the  sum  of  $425,000  for 
the  construction  of  a  new  Power  House  complete  with  the 
most  modern  machinery  and  equipment,  it  being  the  inten- 
tion, on  completion  of  this  building,  to  convert  the  present 
Power  House  into  a  pumping  station. 

Provision  is  also  made  in  the  1913  Capital  Estimates  for 
the  sum  of  $25,000  for  investigating  and  reporting  upon  the 
construction  and  operation  of  Gas  Works,  and  the  prepara- 
tion of  plans  and  specifications,  it  being  the  intention  to 
commence  the  construction  of  a   Gas   Plant  early  in   1914- 

Rates. 

For  energy  used  in  one  installation  and  registered  on  one 
meter  in  one   month. 

Light. 

First  300  kw.  hours  at  /c;  all  used  in  excess  of  300  kw.  at 
6c  per  kw.  hour. 

Light  used  in  day  time  on  two  rate  meter  in  installation 
of  over  5  kw.  of  maximum  demand,  5c  per  kw.  hour. 


232  SELECTED   ARTICLES 

Power. 

First  300  kw.  hours  at  5c  per  kw.  hour;  300  to  600  kw. 
at  4c  per  kw.  hour.  All  in  excess  of  600  at  3>:^c  per  kw. 
hour. 

For  power  used  i"  day  time  on  two  rate  meters  in  instal- 
lation over  5  kw.  of  maximum  demand,  3c  per  kw.  hour. 

Heating  and  Cooking. 

Energy  for  heating  and  cooking  apparatus  supplied  at 
power  rates. 

A  minimum  rate  of  $1.00  per  month  to  be  charged  on  all 
light  services  and  $1.00  per  month  per  connection  h.  p.  in 
motors  or  kw.  of  maximum  demand  for  heating  services. 

Special  rates  arranged  on  large  power  services  according 
to   condition  of  service. 

Meter  rental  for  light,  25   cents  per  month. 

Meter  rental  for  power,  50  cents  per  month. 

Meter  rental  for  two  rate  meter,  50  cents  per  month. 

Meters  are  furnished  for  all  installations.  Burned  out 
lamps  are  renewed  by  the  City,  and  lamps  sold  at  the  Elec- 
trical Department  Office  at  corner  of  Dewdney  and  Broad 
Streets. 

Accounts  are  rendered  monthly  by  the  City  Treasurer 
and  are  payable  monthly.  Ten  per  cent,  discount  is  allowed 
on  current  light  and  power  only  if  paid  within  ten  days  of 
account  leaving  treasurer's  office. 

In  the  event  of  nonpayment  of  account,  connections  are 
cut  off  within  twenty  days  after  date  of  mailing  and  a  fee 
of  $1.00  charged  for  each  reconnection. 

Regina,  Saskatchewan,   Canada.    City  Clerk.    Municipal 

Manual,  1913.  pp.  59-61. 

Street   Railway. 

In  1910  it  was  decided  to  undertake  the  installation  of  a 
Street  Railway  System  as  a  municipal  enterprise.  The  Coun- 
cil submitted  to  the  ratepayers  the  question  of  granting  a 
f-o„^hise  to  one  of  a  number  of  companies,  who  applied  for 


MUNICIPAL  OWNERSHIP  233 

it;  but,  notwithstanding  that  unusual  difficulties  would  have 
to  be  overcome,  they  decided  that  it  would  be  undesirable 
to   grant  a   franchise. 

The  work  of  construction  was  commenced  in  the  spring 
of  191 1,  and  on  July  29th  the  first  service  was  instituted,  and 
a  constant  service  has  been  maintained  since  that  date. 

The  following  are  details  of  the  system  up  to  December 
31,    1912. 

Capital    Expenditure    $922,000.00 

Mileage   of  Track 16 

Rolling  Stock   20  cars,   i   snow  sweeper 

Gross  Earnings   for   1912 $100,842.00 

Operating   Expenses,   1912 $  85,900.00 

Total  Number  of  Passengers  Carried  to  Dec.  31st., 

1912     2,195.726 

The  system  has  proved  to  be  a  much  appreciated  utility; 
and  a  comprehensive  scheme  of  extensions  is  outlined  for 
1913,  covering  practically  the  whole  area  within  the  city 
limits,  and  providing  for  some  fifteen  (15)  additional  miles  of 
track;  fourteen  (14)  additional  street  cars,  several  freight 
cars  and  other  freight  equipment,  and  additional  plant  for 
power. 

Spur  Track  System. 

The  city  is  fortunate  in  possessing  considerable  property, 
which  was  transferred  to  it  from  various  sources  in  the  past 
and  which  at  the  present  time,  forms  an  exceedingly  valu- 
able asset.  Parts  of  this  property  have  been  sold  from  time 
to  time  and  built  upon,  and  it  is  being  handled  in  such  a  way 
as  seems  best  to  enhance  the  development  of  the  city.  A 
section  of  city  property  covering  about  320  acres  has  been 
set  aside  as  an  Industrial  District,  and  is  being  served  by 
spur  tracks  laid  out  in  a  suitable  way  to  serve  all  the  district 
from  the  Canadian  Northern,  Grand  Trunk  Pacific  and  Ca- 
nadian Pacific  Railways.  A  large  Industrial  District  contain- 
ing many  warehouses  doing  an  extensive  business  has  grown 
up  in  this  area,  the  wholesale  distribution  business  amount- 
ing in  1912  to  over  $40,000,000.  The  City  holds  warel^^"-''- 
sites    throughout    this    district,    which    are    c— -ca    by    spur 


234  SELECTED   ARTICLES 

tracks,  at  a  value  of  from  $i,ooo  to  $2,000  for  lots  25x125  in 
size,  except  corner  lots  which  are  sold  at  a  slight  additional 
advance  on  this  price.  This  is  less  than  the  actual  value 
of  the  property,  and  in  order  to  ensure  that  the  property 
will  be  developed  when  sold,  restrictions  consistent  with  the 
conditions  set  out  in  the  application  are  made  whereby  the 
purchasers  are  required  to  develop  the  property  within  one 
year  from  the  date  of  purchase.  The  property  throughout 
this  district  is  .being  sold  very  fast,  with  corresponding 
rapid  development,  thus  showing  that  business  men  looking 
for  sites  for  their  various  businesses  appreciate  the  advan- 
tages  offered  to  them  by  the  city  in  this  regard. 

Winnipeg,   Manitoba,    Canada.     City    Clerk.     Municipal 

Manual,  1913.  pp.  92-5. 

Municipal  Ownership. 

The  City  of  Winnipeg  is  a  firm  believer  in  Municipal 
Ownership  of  all  public  utilities.  The  City  owns  and  oper- 
ates its  Hydro-Electric  Power  Works,  Water  Works  Plant. 
Street  Lighting  System,  Stone  Quarry,  Fire  Alarm  System, 
Police  Signal  System,  Fire  Service  Water  Works,  Asphalt 
Plant  and  Gravel  Pit.  Winnipeg  enjoj^s  the  distinction  of 
being  the  first  city  in  America  to  acquire  a  Municipal  Asphalt 
Plant. 

City  Quarries: 

The  first  quarry  was  opened  in  1897,  and  made  a  separate 
department  in  1901.  New  quarry  opened  at  Stony  Mountain 
in  1906  comprises  80  acres. 

Output : 

1901 — 21852  yds.  at  $1.30 $  28,407.60 

191 1 — 891 19  yds.  at  $1.20 106,942.80 

1912 — 84221  yds.  at  $1.10 92,643.10 

Paid  in  Freight —  Wages 

1901 — $16,984.00     $26,219.00 

^^'T $26,998.99         41.824.68 

I912— $23,OoQ^,^,_^^ 47,173.56 


MUNICIPAL  OWNERSHIP 


235 


City  Gravel  Pit— 

This  plant  was  started  in  1882  and  was  placed  in  the 
Quarries  Department  in  1912.     Lot  contains  40  acres. 

Output: 

191 1 — 51090  yds.  at  65c $33,208.50 

1912 — 65136  yds.  at  60c 39,081.60 

Day  Labor: 

The  Pavements,  Sewers  and  general  improvements  con- 
structed in  the  Citj'-,  including  Water  Works  extensions,  are 
done  very  largely  by  day  labor  at  a  considerable  reduction 
in  cost  to  what  it  was  under  the  contract  system. 

Fire  Service  Water  Works: 

The  City  has  installed  a  High  Pressure  Water  System 
for  additional  fire  protection  in  the  central  business  parts 
of  the  Cit3^  The  plant  consists  of  four  large  and  two  small 
Glenfield-Kennedy  pumps  driven  by  Crossley  gas  engines 
and  has  a  capacity  of  9,000  gallons  per  minute  at  300  lbs. 
pressure.  The  cost  of  the  system  is  assessed  upon  the  prop- 
erties within  the  benefited  area,  but  the  City  at  large  pays 
the    cost    of   maintenance    and    operation. 

No.  of  miles  of  mains 9 

No.   of  hydrants 95 

Gas  Works: 

The  City  has  the  authority  to  issue  debentures  to  the 
amount  of  $600,000  for  the  purpose  of  constructing  gas 
works. 

Municipal  Power: 

Realizing  the  grea!  advantages  afforded  to  manufacturers, 
power  users  and  the  householders  generally  by  having  avail- 
able an  abundant  supply  of  electric  energy  for  power  and 
lighting  purposes,  the  City  of  Winnipeg  in  1905  reached  a 
decision  to  undertake  an  hydro-electric  development  as  a 
municipal  enterprise.  After  a  careful  examination  of  the 
hydraulic  resources  of  the  Winnipeg  River,  the  engineers  of 
the  City  reported  in  favor  of  the  site  at  Point  du  Bois.  the 
estimated  cost  of  the  developm^^^^  t^xMg^  ^1)3,250,000,  and  in 
June,   1906,  the   ratepp--  ^  expressed  themselves   in  favor  of 


236  SELECTED    ARTICLES 

the  City  expending  this  amount  of  money  on  municipal  hy- 
dro-electric works.  The  designs  for  the  works  were  com- 
menced in  the  fall  of  1906  and  tenders  received  and  contracts 
let  for  the  general  works  in  January,  1909,  and  for  machinery 
for  equipment  of  the  Generating  Station  in  September,  1909. 
The  construction  and  equipment  of  the  system,  including 
the  Transmission  Line,  Terminal  Station  and  a  portion  of 
the  distribution  lines  in  the  City,  was  completed  on  October 
16,  191 1.  LTpon  completion  of  a  thirty  days  test  the  plant 
was  turned  over  to  the  City  for  operation,  and  it  speaks  vol- 
ume^ for  the  excellence  of  design,  construction  arnd  equip- 
ment of  the  works  when  the  fact  is  known  that  from  the 
time  the  electric  power  was  first  turned  on  the  plant  has 
given   service   without  interruption   of  any  kind. 

» 

Twentieth  Century  Magazine.  7:8-15.    November,  1912. 

^Municipal  Lighting.     C.   M.  Sheehan  and  Albert  Firmin. 

The  United  States  today  is  knit  together  by  a  labyrinth 
of  roads,  avenues,  streets,  and  alleys  upon  which  the  rich 
and  the  humble,  the  just  and  the  unjust,  are  free  to  traverse 
on  a  common  basis,  without  let  or  hindrance,  so  long  as  a 
decent  regard  for  the  rights  of  other  wayfarers  is  observed. 
These  thoroughfares,  with  practically  no  exceptions,  were 
cut  and  constructed  and  are  now  being  maintained  by  the 
people,  through  diverse  political  units  or  governments  rang- 
ing in  form  all  the  way  from  simple  village  boards  of  super- 
visors to  great  municipalities  like  New  York  City.  We  have 
become  so  accustomed  to  this  state  of  affairs,  and  the  results 
have  been  so  eminently  satisfactory,  that  we  never  question 
the  wisdom  which  prompted  or  the  force  of  public  opinion 
which  has  continued  it.  Though  we  may  be  desirous  at 
times  of  changing  the  particular  government  officials  who 
are  empowered  to  exercise  supervision  over  our  thorough- 
farp<;,  and  occasioually  find  it  imperative  to  do  so,  we  never 
entertain  any  thougnt  v.?  -^rljcally  changing  the  system  or 
substituting   private    for    public    cu^u.  1,, 


►  !    I    I 


MUNICIPAL  OWNERSHIP 


^Z7 


The  care  and  maintenance  of  our  streets  and  avenues  is 
a  very  large  and  very  complex  problem,  but  as  we  are  ac- 
customed to  it,  we  are  not  awed;  yet,  strangely  enough, 
when  the  question  arises  as  to  whether  or  not  governments 
should  themselves  light  public  streets,  or  engage  corpora- 
tions to  do  so,  there  is,  on  the  part  of  many,  a  timorous  un- 
certainty as  to  the  wisdom  of  public  ownership,  and  in  some 
cases  a  vigorous  denunciation  of  the  plan.  This  denuncia- 
tion is  based  on  the  assumption  that  the  government  can- 
not perform  such  work  as  satisfactorily  as  the  corporations. 
That  is  to  say,  we  accept  the  greater  problem  and  shy  at  the 
lesser.  In  some  cases,  while  this  extreme  view  is  not  enter- 
tained, the  almost  equally  absurd  view  is  advanced  that, 
though  the  government  should  be  permitted  to  illuminate 
the  thoroughfares,  it  should  be  strictly  confined  to  that 
work  alone,  and  restrained  from  connecting  the  wires  or 
pipes  of  such  street  system  with  the  residences,  stores,  and 
factories  of  its  citizens  which  line  them.  Yet  in  many  cases 
those  who  fear  such  an  extension  of  government  ownership 
are  the  users  of  water  delivered  by  municipal  agencies,  or 
the  recipients  of  some  other  form  of  government  activity 
of  a  parallel  character.  It  is  to  show  that  there  is  nothing 
startling  in  the  proposition  of  municipal  ownership  of  light- 
ing plants,  and  that  such  municipal  plants  are  making  head- 
way even  against  tremendous  and  unfair  antagonism,  that 
this  article  is  written.  At  this  time,  municipal  electric  light- 
ing plants  only  will  be   considered. 

The  commercial  conditions  of  the  past  fifty  years  have 
brought  about  a  situation  where  men  engaged  in  business 
are  impelled  to  win  trade,  not  b}-  the  superiority  of  the 
wares  they  offer  or  the  modesty  of  their  prices,  but  by  pre- 
venting would-be  rivals  from  engaging  in  competition  against 
them.  The  effort  is  so  to  bring  matters  about  that  the 
market,  whatever  it  be,  shall  be  monopolized  and  fenced  in 
for  personal  exploitation.  The  electric  lighting  of  municipal- 
ities and  villages  is  no  exception.  Those  who  at  the  outset 
of  the  development  of  electric  lighting  feared  competition 
from  municipal  ownership  or  entertained  designs  of  exploita- 


238  SELECTED   ARTICLES 

tijn,  quickly  secured  legislation  to  prevent  cities  and  towns 
from  constructing,  purchasing,  or  taking  over  plants  for  pub- 
lic operation,  except  upon  conditions  which  are  intentionally 
designed  to  be  difficult  to  fulfil.  Ordinarily,  the  village, 
town,  or  city  which  desires  to  establish  an  electric-light 
plant  must  first  obtain  the  consent  of  the  legislature.  The 
influence  in  our  several  legislatures  of  the  interests  that  are 
antagonistic  to  the  extension  of  public  ownership  is  a  mat- 
ter of  such  common  knowledge  that  it  is  not  necessary  to 
more  than  call  it  to  mind  here,  when  it  will  be  seen  what 
difficulties  are  likely  to  be  encountered  in  the  effort  of  cit- 
izens of  a  town  or  city  to  secure  from  the  legislature  enabling 
acts.  Then  when  the  consent  of  the  legislature  is  finally 
obtained,  the  consent  of  the  local  authorities  must  be  pro- 
cured. After  all  of  which  it  not  infrequently  happens  that 
the  question  must  be  submitted  to  popular  vote,  and  ordi- 
narily finally  to  win  out  it  must  secure  at  least  three-fifths  of 
all  votes  cast  on  the  proposition — in  many  cases,  indeed,  the 
afiirmative  vote  must  be  equal  to  three-fifths  of  the  vote  cast 
for  the  highest  officer  voted  for  at  the  same  election,  so 
that  every  person  who  fails  to  vote  on  the  proposition  has 
his  vote  counted  against  public  ownership.  And,  after  all 
these  difficulties  have  been  overcome,  the  contract  for  con- 
struction or  the  details  of  purchase  must  be  approved  by 
certain  of  the  local  authorities.  While  all  these  obstacles 
have  to  be  overcome  before  a  municipal  plant  can  be  in- 
stalled, a  private  corporation  can  usually  procure  a  franchise 
to  supply  current  by  a  mere  majority  vote  of  a  quorum  of 
a  legislature.  Thus  while  a  municipality  is  encountering 
difficulties  which  seem  created  to  embarass  and  harass  it, 
the  corporation  can  secure  from  the  legislature  the  franchise 
it  desires,  and  finds  its  path  both  straight  and  smooth.  Yet 
with  all  these  obstacles  in  the  way,  municipal  ownership  of 
electric-light  plants  has  grown  from  one,  in  1881,  to  I377)  J" 
1911. 

It  will  be  observed  that  the  people  are  awakening  to  the 
necessity  of  municipal  operation,  for  while  in  1882  the  ratio 
of  public  to  private  plants  was  but  i  to  8^^,  in   1892  it  was 


MUNICIPAL  OWNERSHIP  239 

I  to  5.  in  1902,  I  to  sVo,  and  in  191 1  it  reached  i  to  3^.  If 
a  municipal  plant  is  abandoned,  however,  or  substituted  by 
a  private  plant,  the  press  agents  of  the  electric  interests 
throughout  the  country  advertise  the  fact  far  and  wide  and 
it  goes  forth  that  municipal  ownership  is  a  failure;  and  this 
notwithstanding  that  on  the  whole  it  is  gaining  ground. 
The  Federal  Census  of  1907  shows  that  during  the  preceding 
five  years  though  only  ^3  municipal  plants  changed  to  pri- 
vate operations,  113  private  plants  changed  to  municipal 
operation. 

There  is  a  feature  of  municipal  ownership  of  lighting 
plants  in  the  United  States  to  which  attention  has  never 
been  adequately  called,  and  which  is  of  striking  force  as 
indicative  of  the  struggle  that  is  going  on,  and  of  how  the 
movement  towards  municipalization  is  compelled  to  make 
headway  very  largely  under  the  most  disadvantageous  con- 
ditions. In  explanation  of  what  this  feature  is,  it  should  be 
said  that  electricity,  like  most  commodities,  can  be  manu- 
factured in  large  quantities  relatively  cheaper  than  in  small, 
and  ordinarily  the  greatest  profits  can  be  realized  in  serv- 
ing the  largest  communities.  Small  communities  ofifer  fewer 
inducements  than  large  for  capital,  considered  dollar  for 
dollar;  and  hence,  while  the  struggle  of  the  interests  has  been 
to  prevent  the  introduction  of  municipal  plants  anywhere, 
the  opposition  has  been  strongest  in  locations  where  profits 
have  seemed  greatest.  The  burden  of  supplying  the  least 
desirable  locations  has  fallen  on  the  municipalities,  3^et  an 
analysis  of  results  shows  they  have  been  mainly  successful. 

This  feature  of  confining  municipal  undertakings  to  the 
risks  which  look  unprofitable,  and  leaving  the  good  things 
in  the  commercial  world  to  private  concerns  is  not  only  true 
of  lighting  plants  but  is  exhibited  in  the  case  of  certain 
New  York  City  ferries.  These  are  pointed  out  as  municipal 
failures,  whereas  the  ferries  were  actually  private  failures 
before  they  were  turned  over  to  the  city.  The  companies 
which  operated  them  could  not  do  so  profitably.  Matters 
went  from  bad  to  worse,  and  the  communities  which  were 
dependent   upon   them,   and   particularly   Staten    Island,   saw 


240  SELECTED   ARTICLES 

ahead  great  land  value  and  property  depreciation,  if  not 
absolute  ruin,  in  the  event  of  suspension  of  traffic,  so  that 
the  municipality  in  self-protection  was  obliged  to  take  that 
which  no  corporation  or  individual  would  continue.  That 
municipal  ownership  of  ferries  would  prove  a  failure  from 
the  standpoint  of  financial  returns  was  a  foregone  conclu- 
sion, but  the  conditions  were  and  continue  such  that  no  form 
of  ownership  can  be  anything  but  a  failure  on  the  same  basis. 
As  long  as  there  was  a  prospect  of  profit  either  from  opera- 
tion or  stock  juggling,  the  corporation  held  on;  when  this 
ceased,  it  let  go. 

It  is  not  to  be  understood  from  what  has  been  said,  how- 
ever, that  municipal  ownership  is  absolutely  confined  to 
small  towns,  for  there  are  numerous  exceptions,  and  some 
of  the  greatest  successes  have  been  in  large  places;  but  a 
study  of  the  history  of  their  creation  shows  that  the  struggle 
has  been  the  keenest  and  the  greatest  opposition  has  been 
encountered  where  the  prospects  have  indicated  that  the 
trial  would  be  most  worth  while. 

In  the  case  of  private  ownership  in  large  towns  and  cities, 
it  is  very  common  for  the  extension  of  wires  to  be  confined 
to  the  principal  streets,  as  is  the  case  in  Brooklyn,  N.  Y. 
Here  a  private  company  has  been  operating  since  1884,  yet 
the  streets  upon  which  current  can  be  obtained,  even  in  the 
thickly  settled  districts,  are  comparatively  few,  and  the 
company  gives  as  an  excuse  that  the  cost  of  extension  of  its 
wires  is  prohibitive;  yet  in  scores  of  villages  throughout  the 
country  isolated  plants  are  successfully  operated  under 
municipal  ownership  though  the  population  thereof  is  no 
greater  than   that  of  a   single   square   block  in   Brooklyn. 

Investigation  shows  that  in  173  places  where  municipal 
ownership  prevails,  with  a  total  population  of  1,158,143,  the 
ratio  of  consumers  to  population  is  about  one  to  eleven  per- 
sons, whereas  in  Brooklyn,  under  private  ownership,  and 
with  all  the  advantages  of  a  compact  population  of  about 
1,700,000  in  which  to  develop  business,  the  ratio  is  only  one 
to  every  no  persons.  In  173  places  enjoying  municipal  own- 
ership, it  has  been  found  that  the  ratio  of  consumers  to  pop- 


MUNICIPAL  OWNERSHIP  241 

ulation  is  the  equivalent  of  every  second  family.  This  is 
important,  for  it  shows,  from  the  standpoint  of  service,  that 
people  must  be  getting  what  they  want  or  they  would  not  be 
seeking  it  so  largely. 

Naturally  the  question  as  to  whether  or  not  municipal 
plants  are  furnishing  current  as  cheaply  as  private  plants  is 
very  common.  Let  us  again  take  the  Brooklyn  company  as 
a  standard  of  privately  owned  plants,  a  high  exemplar  of 
which  it  professes  to  be.  Until  recently  its  ordinary  rate  was 
12  cents  per  kilowatt,  but  following  a  campaign  by  a  lead- 
ing civic  association,  in  July,  1912,  it  reduced  it  to  11  cents, 
with  much  advertising  of  its  concession;  yet  out  of  251 
plants  recently  investigated,  all  operated  municipally,  it  was 
found  that  201  charged  less  than   11   cents. 

An  analysis  has  been  made  of  eighteen  municipal  plants 
whose  method  of  bookkeeping  conforms  in  details  of  cost  to 
that  of  the  Brooklyn  company,  the  object  being  to  compare 
the  cost  of  the  various  units  which  enter  into  the  cost  of 
current.     The  results  are  shown  in  the  accompanying  table. 

It  is  noticeable  that  the  actual  cost  of  generation  and 
distribution  combined  is  practically  the  same  in  the  munici- 
pal and  the  private  concerns.  There  is  a  wide  difference, 
though,  between  the  "general  expenses"  and  "fixed  charges" 
of  the  public  and  of  the  private  company.  It  will  be  ob- 
served that  the  Brooklyn  Edison  Co.,  the  private  company, 
charges  up  under  these  headings  two  and  a  quarter  cents 
out  of  a  total  cost  of  four  and  seventy-three  one  hundreths 
cents,  whereas  only  one  of  the  public  plants  equals  this  fig- 
ure, and  most  of  them  are  even  below  one  cent.  Further 
inquiry  shows  that,  under  the  head  of  fixed  charges,  the 
inunicipalities  in  several  instances  are  including  sinking 
funds.  The  reason  this  item  is  so  heavy  in  the  case  of 
private  companies  is  that  interest  upon  bonded  indebtedness 
must  be  met  from  this  fund,  and  the  swollen  bonded  in- 
debtedness is  the  burden  that  tells. 

The  corporations  are  forever  complaining  that  they  are 
oppressed  by  taxation  and  that  it  is  unfair  to  compare  them 
with  municipal  plants  for  the  reason  that  such  are  untaxed, 
yet   with  our   specimen  private   company  we   see   that  taxa- 


242 


SELECTED    ARTICLES 


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MUNICIPAL  OWNERSHIP  243 

tion  is  but  three-tenths  of  a  cent  per  kilowatt,  out  of  a 
total  cost  of  four  and  seventy-three  one  hundreths  cents, 
and  this  includes  the  special  franchise  tax.  Investigation 
brought  out  an  interesting  fact  in  respect  to  this  company 
in  this  particular.  In  the  report  of  the  Public  Service  for 
1908,  it  was  set  forth  that  the  tangible  property  on  which  the 
"Kings  County  system"  (Brooklyn  system)  is  assessed  for 
taxes  was  but  $1,581,240.  to  wdiich  was  added  franchise  value 
of  $10,550,000,  or  a  total  of  $12,131,240  on  which  tax  was 
assessed,  yet  the  reported  capitalization  was  $20,805,993.92. 
It  is  conceded  that  the  value  placed  on  the  property  for  the 
purpose  of  taxation  was  too  low,  and,  it  is  fair  to  infer,  was 
adopted  to  escape  taxation.  But  even  allowing  for  this,  it 
is  plainly  apparent  that  the  capitalization  was  out  of  all  pro- 
portion to  the  actual  value  of  the  plant  and  equipment.  The 
franchise  value  represents  mainly  capitalization  of  excess 
profits.  How  much  better  it  is  for  the  communities  to  con- 
struct their  own  plants  and  confine  capitalization  to  the 
actual  cost  than  to  permit  private  parties  to  pyramid  capi- 
talization in  this  way  and  then  burden  the  consumers  with 
a  weight  of  interest  even  to  eternity. 

In  the  case  of  private  plants,  whether  business  grows  or 
not,  there  is  practically  never  an  effort  to  diminish  indebted- 
ness. The  men  who  dominate  the  affairs  of  corporations 
are  largeh^  those  who  derive  their  incomes  from  the  interest 
on  the  bonded  indebtedness  of  their  undertakings,  and  nat- 
urally the  effort  is  to  perpetuate  and  not  to  terminate  their 
bonds.  In  the  case  of  municipally  owned  plants  there  is 
contrary  effort.  It  is  found,  for  instance,  that  the  municipal 
plants  mentioned  in  the  following  table,  forty-two  in  all.  are 
free  of  debt: 

City  Value 

of    Plant 

Sanitary   District   of  Chicago,   111 $4,036,599 

Chicago,    111 2,788,909 

Logansport.    Ind 750.000 

Jacksonville,     Fla 515,703 

Fort  Wayne,  Ind 300,000 

Owensboro,    Ky 211,000 


244  SELECTED   ARTICLES 

Coldwater,    ]\Iich 170,000 

Henderson,    Ky 161,000 

Austin,   Minn 85,000 

Bangor,    Me 85,000 

Auburne,  Ind 75, 000 

Peru,   Ind 65,000 

Galveston,    Texas    65,000 

Bay    City,    Mich 57,974 

Whitehall,    Mich 50,000 

Aurora,    111 46,469 

Clarkson,    Neb 40,000 

So.  Brooklyn,  Cleveland,  Ohio   40,000 

Paducah,    Ky 36,000 

Ada,    Minn 30,000 

St.    Peter,    Minn 30,000 

Carmi,    111 '     30,000 

Appleton,    Minn 25,000 

Bayfield,   Wis 20,346 

Elkhorne,   Wis 29,866 

St.   Joseph,   Minn 20,000 

Shelbina,    Mo 20,000 

Wolfboro,    N.    H 20,000 

Solvay,   N.  Y 20,000 

Arcadia,    Wis 20,000 

Columbus,  Wis 20,000 

Thornton,    Ind 19,000 

Little    Rock,   Ark 15,000 

Son  way,    Ark 15,000 

Fairfield,    Iowa     15,000 

Blair,    Wis 15,000 

Westfield,   N.  Y 12,000 

St.   Clairsville,  Ohio    10,000 

La  Grange,  Mo 7,5oo 

Erie,    Colo 4,000 

Bath,    111 3,200 

Benedict,    Neb 3,ooo 

$9,982,546 


MUNICIPAL  OWNERSHIP  245 

Of  the  259  municipal  plants  with  a  total  valuation  of 
$25,402,106,  the  bonded  indebtedness  amounted  to  but 
$8,961,579.  The  municipalities  ordinarily  undertake  to  cre- 
ate a  sinking  fund  for  liquidating  the  bonds  as  they  fall  due, 
but  how  seldom  it  is  that  corporations  do  so.  The  sugges- 
tion that  the  public  service  corporations  should  be  com- 
pelled to  create  a  sinking  fund  for  the  liquidation  of  suc- 
ceeding bond  issues  is  of  but  recent  origin,  and  as  yet  has 
secured  no  considerable  indorsement,  though  it  is  a  matter 
of  exceeding  great  importance  to  the  public.  Yet  so  long 
as  our  lax  laws  permit  the  continuation  of  the  system  now 
prevailing,  bonded  debts  will  mount  not  only  up  to  the  full 
value  of  the  plants  but  to  a  point  where  it  will  exceed  this 
value  and  will  discount  future  earnings. 

It  is  true  that  the  cost  of  all  the  various  municipal  plants 
mentioned  as  free  from  debt  has  not  Deen  paid  exclusively 
from  earnings,  but  in  some  cases  from  taxation,  but  the  time 
is  coming  when  the  public  will  recognize  that  it  is  better 
to  pay  for  whatever  is  required  outright  by  taxation  and 
thereafter  freely  to  enjoy  it  even  unto  eternity  than  to 
acquire  it  by  means  of  indebtedness  and  pay  the  bill  at  the 
expiration  of  a  long  period  of  drain  from  interest  charges, 
which  are  more  than  likely  to  exceed  in  the  aggregate  the 
original  debt.  In  the  case  of  municipal  lighting  plants,  and 
other  undertakings  of  a  kindred  character,  when  there  are 
reasonable  prospects  of  amortizing  the  initial  cost  by  earn- 
ings, there  is  justification  for  incurring  indebtedness,  but 
sound  finance  dictates  that  municipalities  should  incur  other 
debts  only  in  extreme  and  very  exceptional  cases.  The  evil 
that  ensues  from  a  departure  from  this  rule  is  shown  in  the 
case  of  New  York  City,  where  last  year  the  interest  charges 
on  the  outstanding  debt  were  27  per  cent  of  the  taxes  raised. 

To  engage  private  corporations  to  do  the  work  of  public 
agencies  offers  no  escape  from  the  evils  of  bonded  indebted- 
ness, as  may  be  seen  by  reverting  to  what  has  already  been 
said  in  respect  to  such  corporations  being  enamored  of  their 
debts  and  ever  reluctant  to  diminish  them.  The  substitution 
of  the  name  "corporation"  for  the  name  "government"  does 


246  SELECTED   ARTICLES 

not  alleviate,  for  in  the  end  the  public  must  bear  the  burden. 
Then  also  municipalities  are  able  to  borrow  at  less  interest 
than  corporations,  so  that  when  bonded  debt  is  incurred  by 
them  the  burden  is  not  as  great  as  when  incurred  by  corpora- 
tions. 

The  greatest  deterrent  to  municipal  ownership  is  the  fear 
of  graft,  yet  the  insidious  pyramiding  of  bonded  indebtedness 
and  the  watering  of  stock  by  private  corporations  is  greater 
in  magnitude  than  graft  ever  was.  Mr.  Roger  W.  Babson 
has  estimated  that  there  is  $30,000,000,000  of  water  in  the 
capitalization  of  the  corporations  of  the  United  States.  This 
means  that  we  are  now  paying  interest  on  excess  capitaliza- 
tion to  the  amount  of  $160  per  family,  or  one-half  as  much 
as  taxes  to  the  national,  state,  county,  and  municipal  gov- 
ernment paid  on  a  per  capita  basis  by  the  citizens  of  New 
York  City,  the  highest  taxed  people  in  the  world.  The  cor- 
poration is  conducted  for  the  advantage  of  those  controlling 
it  at  any  particular  time,  and  it  seldom  happens  that  the 
interests  of  those  in  control  and  the  general  public  are  re- 
garded as  identical,  so  that  it  is  not  surprising  the  municipal 
plants,  which  are  directly  contrary  in  purpose,  being  con- 
structed and  operated  for  the  public  and  not  for  private  gain, 
should  compare  therewith  much  more  than  favorably. 

There  can  be  no  longer  any  doubt  that  municipal  owner- 
ship is  here  to  stay.  Everything  points  to  the  absorption 
by  the  government  of  those  undertakings  which  are  essen- 
tially monopolies.  There  will  doubtless  be  scattered  cases 
where  success  will  not  be  achieved,  where  the  municipal 
plants  will  lapse  back  into  private  hands,  but  with  advancing 
civilization  and  the  rapid  growth  of  our  cities,  electric  light- 
ing will  become  increasingly  essential  for  our  well-being, 
and  it  will  be  brought  more  forcibly  home  to  us  than  ever 
that  we  cannot,  without  great  jeopardy,  permit  interests  with 
ends  inimical  to  the  great  welfare  to  control  it.  One-half 
of  our  lives  we  are  subjected  by  nature  to  darkness,  which 
can  be  relieved  only  by  artificial  means.  There  is  but  one 
safe  repository  for  a  means  so  vital  to  our  well-being,  and 
that  is  in  the  hands  of  the  people  themselves. 


MUNICIPAL  OWNERSHIP  247 

Twentieth   Century   Magazine.   7:27.    November,    1912. 

Public  Ownership  of  Urban  and  Suburban   Street  Transpor- 
tation.     Henry  Demarest   Llo^'d. 

Municipal  ownership  w^ould  mean: 
For  the  street  car  emplo^'^ees: 

Better  wages. 

Shorter    hours, 

Othe"  gains,  and  in  so  far  as  they  are  citizens. 

Self-employment.  They  would  continue  wage-workers, 
but  wage-workers  of  the  public  of  which  they  are  a  sovereign 
part. 

For  other  employees  a  daily  exhibit  of  this  difference  be- 
tween  public   and  private   employment. 
For  the  public: 

1.  Lower  fares. 

2.  Better  service. 

3.  The  latest  improvements. 

4.  Inclusion  of  public  health,  decency,  distribution  of  pop- 
ulation as  elements  to  be  considered  in  the  development  of 
the  street-car  lines. 

5.  Removal  of  the  corrupting  influence  of  the  street  car 
millionaires  in  press,  politics,  pulpit,  society,  the  clubs,  the 
Council,  etc. 

6.  Cutting  out  a  link,  and  a  most  important  one,  in  the 
chain  of  the  private,  profit-seeking  monopolies  of  public  utili- 
ties, making  the  next  step  that  much  easier. 

7.  Educating  the  public  in  the  public  ownership  and  opera- 
tion of  the  "means  of  production,  distribution,  and  exchange," 
and  giving  them  confidence  to  proceed  to  other  socializations 
as  light,  land,  houses,  docks,  manufacture  of  articles  used  by 
the  city,  and  from  that  to  manufacture  of  articles  used  by 
the  citizens. 

8.  Enabling  land  values  to  be  (i)  modified  as  by  exten- 
sions into  the  country,  by  "one  city,  one  fare''  rates:  (2)  so- 
cialized as  by  municipal  experiments,  like  those  in  London 
and  elsewhere  in  buying  land,  building  houses — another  form 


248  SELECTED   ARTICLES 

of  the  "ownership  and  operation  of  the  means  of  production, 
distribution,  and  exchange." 

9.  Bringing  electric  lighting  and  heating  within  practical 
reach,  since  the  power  plants  could  also  furnish  light  and 
heat. 

Here  is  a  movement  in  which  every  step  towards  social- 
ization is  made  easy  for  us.  The  industry  presents  in  an  ag- 
gravated form  every  evil  of  which  the  socialists  complain  in 
the  moiern  situation,  exploitation,  corruption,  monopoly. 
Every  citizen  is  in  touch  with  the  evil,  and  by  tens  of  thou- 
sands they  can  be  taught  socialist  doctrine  and  let  to  co- 
operate in  socialist  work.  The  saving  of  fares  would  be  the 
smallest  item  in  the  lists  of  human  benefits,  but  still  a  sav- 
ing of  $12  to  $24  a  year  by  every  man,  woman,  and  working 
child  who  uses  the  cars  regularly  is  something,  is  it  not? 
Our  total  federal  tax  is  only  $75  per  capita. 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  50  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE.  t. 


MAR  10  1934 


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